Crackdown needed on late payers
THE GOVERNMENT needs to do more to stamp out late payment practices to prevent subcontractors being burnt by the collapse of firms like Carillion, small businesses say.
Wednesday marks the first anniversary of the demise of Carillion, the former construction to outsourcing giant, which saw 20,000 jobs lost and the pensions of nearly 30,000 staff and former employees compromised.
Its collapse spurred a Government clampdown on late payment practices, but the Federation of Small Businesses (FSB) said more needs to be done to protect SMEs that work in the public sector supply chain as subcontractors.
Prior to its demise, Carillion was notorious for paying its suppliers late, despite being signatories to the Government’s prompt payment code.
FSB national chairman Mike Cherry said: “A year on, we have seen the Government make some moves to improve public procurement and stamp out poor payment practices. Recent reforms to crackdown on public sector suppliers that do not pay on time are welcome and send a clear message that paying late is not okay. More needs to be done though if we are to stamp out the practice for good.”
Cherry added that the collapse of Carillion laid bare the “shocking way” some big businesses bully suppliers with late payment and unreasonable terms. Its failure harmed contractors across the country as they were left out of pocket, and “in the worst cases, small businesses were destroyed,” he said.
The managing director of one SME that worked for Carillion on a PFI project said his firm barely survived the experience: “We came as close to going out of business as you possibly can. When it collapsed, we had to lay off 60 guys and find work for senior people who were just left sitting there.
“It wasn’t just the money they owed us, it was the detrimental effect it had on our order book, letting people go, and when Carillion went under, other companies started to hold onto cash longer.” ruthless few running businesses – and through them our public services – as a personal piggy bank.
Other massive outsourcers seem to be teetering on the brink: what on earth will come to light about their operations if and when they fall?
We’ll keep making this case until it is answered, but it is long past time for the Government to get British business working properly for ordinary Britons.