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Payment delays still issue for smaller firms

Specialist sub-contractors are not benefitting from a promise made by the Government to pay its suppliers within 10 days.

The news comes as the Government tries to launch a new voluntary code on payment terms this week for major employers and large corporations.

It was hoped this would extend the faster payment culture the Government wants to encourage to the private sector and British Gas is one of the first firms to sign up. But, there are worries the Government is already struggling to make an impact on payment delays.

Peter Mandelson, the Secretary of State for Business, Enterprise and Regulatory Reform (BERR), told the House of Lords in October that: “Central Government will aim to pay its suppliers as soon as possible, and within 10 days at the latest” to help reduce the impact of the economic slowdown.

10-day pledge missing out small firms

However, this is not being filtered down through the supply chain, according to Claire Curtis-Thomas MP, who is chair of the All Party Building Services Engineering Group.

“It appears that the 10-day pledge only applies to large suppliers,” Ms Curtis-Thomas told a reception at the House of Commons. “Small firms still have to wait 90 days.”

“We must make sure that Lord Mandelson and Gordon Brown see how important this is. It could lead to some small companies going to the wall in the current economic climate,” added Ms Curtis-Thomas.

Lord Mandelson had stated that the regional development agencies were committed to the 10-day policy, and that the National Health Service and local authorities would follow suit.

Main contractor 'just laughed'

However, HVCA vice-president Martin Burton reported that one main contractor “had just laughed” when he raised the 10-day payment issue adding “you’d be lucky”, while another had said it couldn’t pay within 10 days as that would “upset the client”.

“We hoped the Mandelson statement would herald a whole new payment culture,” said Mr Burton. “However, it seems a number of large firms see it as an opportunity to profit at the expense of their supply chain partners.”

'SMEs should write to their direct clients asking if they are aware of the directive and if they are going to implement the temporary improvements,” Mr Burton told H&V News. “They should then issue a ‘Request for Instruction’ to modify their contract/order terms accordingly.

“One NHS Trust I asked recently advised that they were aware of the directive and would seek to improve the speed of payments. They didn't know if they could meet 10 days, but would try, which is encouraging.”

Lord Mandelson’s 10-day directive is being regarded as a temporary opportunity to improve cash flow not to be confused with the more permanent improvements being worked on such as Project Bank Accounts, the Fair Payment Charter, and the campaign to abolish retentions.

“Take advantage of this while it is there because it will be removed as soon as the upturn starts,” Mr Burton advised fellow contractors. “If you don’t ask you don’t get.  This is a step away from the deeply ingrained culture of builders and surveyors seeking to keep back as much of our cash as possible for as long as possible.'

HVCA launches survey on payment delays

The HVCA added that it was now conducting a survey to monitor how public sector clients are responding to Lord Mandelson’s call for reduced payment delays. The online survey asks members and non-members alike to report how many days after the due date they receive payment when working directly, or as sub-contractors, on public sector projects.

It invites respondents to fill in the questionnaire now and again in four to six weeks time so the association can gauge whether there has been any improvement in payment terms. It will then report its findings to officials in Lord Mandelson’s department.