Government to tackle late payments to SMEs

Published:  28 May, 2015

Proposals by the New Business Secretary, Sajid Javid MP, to combat late payments to small firms as part of The Enterprise Bill have been cautiously welcomed by the Federation of Master Builders (FMB).

Brian Berry, chief executive of the FMB, said: "Late payment has plagued the construction industry for far too long. Late payment by larger firms is a major barrier to small and micro firms forming part of the supply chain for public sector contracts – if we can solve the problem of late payment, we will also open up public sector construction to thousands of construction SMEs. As two-thirds of all construction apprentices are trained by micro-firms, this will have untold benefits for local jobs and growth."

The Enterprise Bill, outlined in yesterday's Queen's Speech, is being introduced to cut the amount of red tape businesses have to deal with, to help create new jobs.

A Small Business Conciliation Service will be created in order to help resolve business-to-business disputes without the need for court action, tackling late payment issues in particular.

Mr Berry continued: "The last government made some small steps in the right direction in terms of late payment – for example, a new duty to report on payment terms will be imposed on all large firms from April 2016 and we hope this will help improve the situation through increased transparency. However, there is much more to do. At the end of last year the FMB and NSCC published research which showed that more than 90% of small construction firms agree contractual payment terms with their clients of 45 days or fewer, but only 57% of members actually receive payment within those terms."

Mr Javid has also touted the idea of widening the powers for representative bodies to act on behalf of their members in challenging payment terms they believe to be unfair. Mr Berry said the FMB eagerly awaited more details on this, as it is "often difficult for small firms to highlight poor payment terms directly without biting off the hand that feeds".