The Specialist Engineering Contractors (SEC) Group has welcomed Whitehall’s pledge to pay its bills within 10 days of receipt of invoice.
But it said if the Government was serious about supporting small and medium-sized enterprises through the recession, it would also need to introduce an enforcement mechanism to ensure the entire supply chain benefited from speedier payment terms.
The comments were made after Lord Peter Mandleson, the business secretary, said the Government was seeking to extend its commitment to pay firms within 10 days by getting NHS Trusts, local authorities and public sector employers in England to agree to similar conditions.
At the time of the announcement earlier this week Peter Mandleson said: “We are on the side of SMEs and understand that they are facing tough times. Businesses tell us that they need access to cash flow.
“That’s why central Government is committed to paying businesses within 10 days. And we are urgently speaking to the wider public sector to extend this commitment. We want everyone in the supply chain to pay their bills more quickly.”
Professor Rudi Klein, SEC Group chief executive, said: “We wrote to Peter Mandleson yesterday congratulating him on the fantastic news.
“We said this measure was far better than the current 30-day payment terms but we also said we’d like him to outline what he was planning to do to enforce the 10-day commitment down the supply chain across the public sector.
“The construction industry consists overwhelmingly of SMEs acting as specialist contractors in the supply chain. They are at significant risk of insolvency with costs rising, demand for work slowing and borrowing costs increasing significantly.
“Although we greatly welcome the news, in the longer term this commitment will ring hollow if there are no measures in place to ensure that specialist contractors can also benefit.”