Government payment strategies boosting the working capital of corporates but jeopardising the future of SMEs

January 8, 2015

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Andy Richardson, in the Northern Echo, reports on the findings of the government’s Public Accounts Committee, whose chair, Margaret Hodge, said: “Small and medium-sized enterprises have a vital role to play in the UK’s economy, yet Government is not getting the basics right when it comes to promptly paying SMEs, from which it directly buys £4.5bn of goods and services each year”.

Amyas Morse, head of the National Audit Office said: “There has been a disappointing lack of effort by government to check whether the implementation of the policy is actually helping SMEs. . .”. There was “serious concern” about the prompt payment figures publicly reported by four departments — business, defence and the home and cabinet offices — which it concluded were “overstated”:

“It beggars belief that government departments do not record the date when paper invoices, commonly used by SMEs, are first received, and that around a third of SMEs don’t get paid within 30 days by their public sector clients.

“This is despite government’s claim that it is committed to increasing the role of SMEs in providing public services rather than allowing large companies like Serco and G4S to continue dominating the market, often at the expense of the taxpayers’ interest.

THE Government is being urged to improve payments to small companies after an official report found delays across the public sector. in a third of cases, public sector clients took more than 30 days to settle up.

Mike Cherry, policy chairman of the Federation of Small Businesses, said, “It’s a scandal that thousands of businesses have gone under because of late payment, with numerous others struggling with their cashflow because of poor payment practices”.

The FT reports the NAO concluded that government practice could simply be boosting the working capital of its main contractors rather than benefiting SMEs further down the chain. A Government spokesperson responded: “The report recognises that we are making progress, but there is more to do. This year we will enforce payment within 30 days all the way down public sector contracts’ supply chains.”

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To read the report click here: http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news/public-services-private-contractors-report/

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