Government suppliers who fail to pay subcontractors promptly could be prevented from tendering for future public contracts.
In a move welcomed by the Federation of Small Businesses (FSB), the Minister for Implementation, Oliver Dowden, has announced that new rules will be implemented in Autumn 2019.
From that point, companies would be barred from tendering for government contracts unless they can demonstrate that they operate a prompt payment regime.
“Cracking down on big businesses supplying to government, and not paying on time, is a win for small businesses, tax payers, the wider economy and public services,” the FSB’s Martin McTague said.
The initiative will, he added, get the thumbs up from the small business community and sends a clear message from the Government that paying late is not okay.
From next Autumn, government departments will only do business with companies who pay their suppliers on time — a move that Mr Dowden says will not only promote a healthy and diverse marketplace of companies providing public services, but also help level the playing field for small businesses bidding for these contracts.
Paying invoices promptly is vital in providing healthy cash flow, particularly for smaller businesses who are the backbone of the UK economy, he explained, as he confirmed that if contractors are late with supplier payments, they could stop winning public contracts altogether — until they clean up their act.
In welcoming the announcement, the FSB emphasised that it has been pushing hard for the reform and that it was pleased to know that the Government was listening.
“We will continue to work with the Government on this and further measures to drive out late payment from Government supply chains once and for all,” Mr McTague said.