MPs bemoan poor payment practices

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14 December 2018

We recently reported on a Government warning that firms with poor payment records risked being stopped from bidding for public sector contracts (see “Pay promptly or lose contracts”).

On the same subject, MPs have issued a damning report which criticises prominent high street stores for their poor attitude towards paying suppliers.

Addressing the problem of productivity in small businesses, members of the Business, Energy and Industrial Strategy (BEIS) Committee found evidence that payment terms are getting longer.

WHSmith (90 days), Holland and Barrett (90 days) and Boots UK (75 days) were all singled out for having excessive standard payment terms.

The Committee also highlighted practices in the construction sector, where poor payment practices are described as “rife”, with retention payments coming in for particular criticism.

To tackle the problem, the report recommends that a statutory requirement for companies to pay within 30 days should be introduced, that all medium and large companies should be required to sign the Prompt Payment Code, and that the Small Business Commissioner should be given powers to fine companies that pay late.

For the Federation of Small Businesses (FSB), Chairman Mike Cherry argued that a fundamental shift in attitudes is required across boardrooms.

The only way to make that happen in large firms, he said, is for each to appoint a Non-Executive Director responsible for overseeing supply chain practice, chairing a Supply Chain Committee alongside the company’s Audit and Remuneration Committees.

Available at http://bit.ly/2RCYPq1, the MPs’ report, “Small businesses and Productivity”, does not focus solely on payment practices, but addresses a range of issues affecting productivity, including support and advice, leadership, management and digital skills, public sector procurement and EU funding.

“UK productivity is falling behind its competitors and it’s important the Government’s Industrial Strategy supports the ‘long tail’ of less productive SMEs to benefit from new technologies and skills,” Committee chairwoman Rachel Reeves said.

Among its recommendations, the Committee calls on the Government to help ensure that businesses have a more meaningful understanding of productivity, why it matters to them and why they should invest time in measuring it.

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