HDC a notable exception to council late payers

HUNTINGDONSHIRE District Council is a notable exception to small firms complaints about the public sector s failure to settle its bills quickly. Research carried out by ICM for the Federation of Small Businesses showed that the Government and its agencie

HUNTINGDONSHIRE District Council is a notable exception to small firms' complaints about the public sector's failure to settle its bills quickly.

Research carried out by ICM for the Federation of Small Businesses showed that the Government and its agencies were still paying small businesses late, despite making commitments over a year ago to pay within 10 days.

The report found that local Government was likely to pay one in four invoices late, and central Government and Government agencies made one in three payments late. This was despite putting a Prompt Payment Code in place and central Government promising to pay within 10 days at the start of the recession in 2008.

But the FSB's Huntingdonshire chairman, Malcolm Lyons, said: "Despite the good efforts of our district council and many of our local authorities, we still hear regularly about public bodies, including some housing associations, emergency services, public amenity management and other organisations financed by Government that are notorious for late payment.

"Where bigger companies receive payment promptly from local authorities, they don't necessarily pass this payment on promptly to their subcontractors, which are usually small businesses."

Small businesses have faced a challenging year, with over half of those surveyed reporting that profits had fallen in 2009. As the recession took hold, the FSB said, all businesses felt the pinch. But it was the small business community that bore the brunt of this practice, and was also leaned on by big businesses, which continued to pay late.

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Frustratingly, the federation added, many businesses had had to resort to using their own long and short-term finance. The survey showed that 41 per cent dipped into personal savings and 43 per cent used their overdrafts last year.

"Twenty-one per cent used a personal credit card. This may be an indication of self-reliance as they encountered a banking sector which refused to lend.

"While large firms have sufficient reserves to cope with late payments, a small business relies on payment within the agreed timescale to ensure it has a steady cash-flow."

The FSB is now urging Government to take the lead in tacking this problem by implementing a 'social clause' in national and local Government contracts.

Mr Lyons said: "It is shocking that after the Government put the Prompt Payment Code in place so many businesses are still being paid late. The public sector needs to set an example that paying late is not acceptable, as this problem persists in the private sector.

"Small businesses rely on receiving payments within the timescale agreed to maintain cash-flow to ensure the business can run on a day-to-day basis.

"This is why the FSB is calling for the introduction of a 'social clause' in all Government contracts. However, this clause must have teeth, and any business found to breach the terms persistently should be fined and be warned they may lose contracts in the future. This will give small businesses confidence and go far to change the poor record of behaviour on this issue.

"Late payment is not a new issue, but it has been a particular problem in the past year and it is more important than ever that this worrying practice is brought to an end.

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