Government tries again on prompt payment

ACE has supported Government’s move to strengthen the impact of the Prompt Payment Code with the appointment of a new advisory board charged with highlighting poor and best payment practice.

Jackie Whitelaw
03 November 2014

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“We welcome the government’s continued focus on this issue, one that continues to hurt the industry despite the improvements we have seen in order books. The formation of an ‘effective’ Advisory Group with the mandate to name and shame bad practitioners should improve the situation,” said ACE chief executive Nelson Ogunshakin.

"New products offered by banks or improved relationships and speedier dispute resolution between tier one contractors and their supply chain will do more to ensure better payment flow from top to bottom.”

But he said that change in the construction sector could only come from within the industry.

 “We believe the real answer to this can only come from industry and the market. New products offered by banks or improved relationships and speedier dispute resolution between tier one contractors and their supply chain will do more to ensure better payment flow from top to bottom.”

Government Chief Construction Advisor Peter Hansford introduced a voluntary payment charter for the industry which committed firms to paying suppliers within 30 days by January 2018. So far, support for it has been disappointing. 

The Prompt Payment Code sets out principles for businesses to follow when dealing with and paying their suppliers. More than 1,700 businesses and public authorities have so far committed to these principles. This includes the representatives on the new board, who were selected because of their good reputations on payment practices.

Skanska is the representative from the construction sector. Other members come from Aviva, Barclays, Bury Council, City of London Corporation, Fujitsu, Greggs and Stort Chemicals.

"This is about a change in culture, which needs businesses and government to work together"

Their brief is to improve monitoring and enforcement of the code, promote awareness of the code and provide advice on whether there is a need to update it.

The board had its first meeting last week and is aiming to come up concrete proposals to increase the reach and bite of the code by spring next year.

Business Minister Matthew Hancock said: "Late payment continues to plague businesses, putting a strain on cash flow and preventing plans for growth. We have committed to tackling this problem, but there is no silver bullet. This is about a change in culture, which needs businesses and government to work together."

Philip King, chief executive of the Institute of Credit Management and co-chair of the Prompt Payment Code Advisory Board said: “The timing is now right for the code to be further strengthened and developed as a key tool in helping to tackle the scourge of late payment and driving a change in business culture from top to bottom.

"The launch of a dedicated Prompt Payment Code Advisory Board is both a positive and exciting step. It will allow individuals to bring their expert advice to the table and identify further improvements to support the creation of an environment where paying on time is the norm rather than the exception.”

The government is also taking action to curb late payment through the Small Business, Enterprise and Employment Bill which is currently going through Parliament. The Bill contains proposals to create a duty for large companies and listed firms to report on their payment practices, as well as reforms to public procurement. This will increase transparency around how companies pay their suppliers, government anticipates.