9 November 2012
The Institute of Credit Management (ICM) has welcomed the warning from Business Minister Michael Fallon that he will publicly name and shame big businesses who fail to sign up to the Government's Prompt Payment Code (PPC).
But Philip King, the ICM's Chief Executive, says the Government could go further and make being a signatory to the Code compulsory for any firm tendering for public sector contracts: "It is wholly right for the Business Minister to put his weight behind the ICM-managed Code, and take the practical step of writing to FTSE 100 and FTSE 250 companies urging them to sign up," he says.
"But this message would be even more convincing if he was to make signing the Code - and clearly demonstrating best practice in fair payment - a pre-requisite for any Government work. Public money should not be going to those firms whose payment practices stifle economic growth."
Mr King found support for this view from South Basildon and East Thurrock MP Stephen Metcalfe, speaking in the Government debate yesterday (November 8). Mr Metcalfe says that all public sector bodies, in receipt of public funds, should sign up to the Code: "All private sector companies used by the public sector should, without exception, sign up to the Prompt Payment Code," he said, "if not in its entirety, then at least when engaged in public sector works. This should form part of all contracts and become accepted practice, and it should be part of any pre-qualification questionnaire."
Late payments, he said, are stifling the ambitions of small and medium-sized companies: "There are billions of pounds being withheld from our economy by some of the organisations who have the deepest and largest pockets. Why are they withholding these payments? I don't know - whether it is malice, poor practice or efficiency - (but) whatever the reason is, this must change."
The PPC was launched by the Department for Business, Innovation and Skills four years ago as part of an initiative delivered through the ICM. The Code demonstrates a commitment to good practice and signatories are obliged to pay their supplier within an agreed time and to make sure there is a proper process for any issues that may arise.
Business and Enterprise Minister Michael Fallon says that too many of the biggest companies are ignoring the Code: "My message to them is clear - make prompt payment a priority or face the consequences of being named. I'm confident that driving up support for the common sense principles in the Code will have a very positive effect."
Currently 1,182 companies are signed up to the Prompt Payment Code. However, only 27 FTSE 100 companies and five FTSE 250 companies are signatories. The issue of late payment has been taken up by a number of MPs, most recently by Debbie Abrahams, the MP for Oldham East and Saddleworth. Speaking in the same debate, Ms Abrahams added: "This is not about pitting private against public, or large against small. It is about doing what is right and fair.
"It cannot be right that large companies by virtue of their wealth and power can ignore their contractual obligations and put such financial pressure on small companies to the point where they become insolvent."