The government’s Payment and Cash Flow review will scrutinise existing payment practices and the measures in place to make sure small firms are not ripped off by larger clients.
The review will consider the progress made in specific sectors of the economy in combatting late payment and weigh up the success – or otherwise – of current payment reporting regulations and the Prompt Payment Code.
Business secretary Grant Shapps said: “That many small firms are routinely paid late is intolerable and presents a real barrier to productivity, the creation of high-skilled jobs and ultimately economic growth.
“This review will allow us to build on the success we have had so far in curbing late payment, unshackling small businesses from this exploitative practice and creating a system that is fit for the future. While we crack on with this work, I also want to remind big businesses of their duty to ensure their smaller suppliers are paid promptly.”
The government is also trying to improve its own bill paying. The Procurement Bill, currently being debated in parliament, proposes a requirement for 30-day payment terms to apply in public sector supply chains.
The performance of tier one contractors in the construction industry has improved in recent years. Data published by the trade association Build UK shows the average time it takes members to pay their invoices has reduced from 45 days to 31 days since the duty to report came in four years ago.
However, there are still significant variations in performance.
ISG takes an average of 15 days to pay its invoices and Costain 19 days, whereas Balfour Beatty and Multiplex average 37 days and Winvic Construction averages 38 days.
Specialist contractors generally pay less promptly that main contractors, which is not surprising given the pay-when-paid culture in the industry. Piling contractor Van Elle, for example, takes an average of 63 days to pay its invoices.