The U.K. government is reportedly planning to blacklist potential contractors that pay their own suppliers late — a response to the recent collapse of Carillion and subsequent revelations of the company’s own late payments practices.
Reports in Credit Strategy on Tuesday (April 10) said construction conglomerate Carillion, which went into liquidation earlier this year, was paying its own suppliers in net-120 days. The organization’s collapse led to outstanding supplier payments being thrown into limbo.
The case has again shed light on the problem of late supplier payments in the U.K., which the government has addressed in several initiatives in recent years. Its latest move was announced this week, with the government launching a public consultation to explore whether government contractors should be excluded from the procurement process if they are paying their own suppliers late.
The publication noted officials are also considering a requirement that government contractors will have to advertise subcontracting opportunities on the Contracts Finder website. Additionally, Prime Minister Theresa May has called on her Cabinet to nominate a small business (SMB) champion minister for each department to ensure SMBs are offered a fair opportunity to participate in government contracts.
Officials are also reportedly considering giving subcontractors greater access to a mechanism to report late and delayed payments.
According to Dun & Bradstreet data, at any given moment, small businesses in the U.K. are owed more than $90,000 in late payments each; more than a tenth of SMBs are owed as much as $350,000. Nearly half of supplier payments (45 percent) occur on credit, the company found.
“The government’s announcement is a positive step in addressing what is a tough and longstanding issue for the U.K.’s small businesses,” said Dun & Bradstreet U.K. Managing Director Ed Thorne in a statement, adding that late payments “can lead to cash flow problems, stifle growth and, in extreme cases, lead to business failure.”
In another statement, Federation of Small Businesses National Chairman Mike Cherry applauded the proposals, noting they would “clamp down on poor payment practice throughout public procurement supply chains. Companies who pay late should not be rewarded with public sector contracts,” he continued. “We need a robust public procurement process that holds larger companies to account for their payment practices.”