The Channel logo

News

By | Kat Hall 8th January 2015 12:14

UK.gov prompt payment promise is POPPYCOCK - NAO

Trickle-down economics ain't happening for subbies

Government is falling short in its commitment to settle debts with SME suppliers inside 30 days, putting some cash-strapped firms at risk of making redundancies.

A report by the National Audit Office revealed central government spends £40bn a year on goods and services, of which about £4.5bn is spent directly with SMEs.

An additional £4bn is spent with SMEs indirectly via larger contractors, said the spending watchdog.

The Cabinet Office has pledged to increase public sector spending with SMEs to 25 per cent of the total budget before the next election.

The NAO noted, however, that most large government suppliers are already "supplied by several tiers of smaller subcontractors."

It said the government has failed to evaluate the effectiveness of the prompt payment commitment in helping small businesses. None of the departments it looked at compile data on whether large suppliers pay SMEs on time.

Amyas Morse, head of the NAO, said today: “There has been a disappointing lack of effort by government to check whether the implementation of the policy is actually helping SMEs.

“We are also seriously concerned about the prompt payment performance figures publicly reported by departments," he added.

The coalition has talked up the importance of SMEs to the economy since coming to power, and constantly warned larger tech suppliers that the days of mega outsourcing deals are over. This was a political statement following numerous costly failed IT projects under Labour.

Ironically, a Small Business, Enterprise and Employment Bill is going through Parliament to curb late payment, including proposals to create a duty for hefty and listed businesses to report on payment practices.

Cash flow is king for any firm, and according to figures published by direct debit company Bacs Payment Schemes, SMEs are owed nearly £40bn as a result of late payments. In contrast larger companies are owed just £6.7bn at any time.

Late payments caused 20 per cent of insolvency last year, according to R3, the association of business recovery professionals. ®

comment icon Read 9 comments on this article or post a comment alert Send corrections

Opinion

Baby looks taken aback/shocked/affronted. Photo by Shutterstock

Kat Hall

Plans for 2 million FTTP connections in next four years 'not enough'
Microsoft CEO Satya Nadella
Stranded_ships

Chris Mellor

Thousands of layoffs announced as spinning rust enters its death spiral

Features

Locker room jocks photo via Shutterstock
Best locker-room strategy: Avoid emulating AWS directly
STRASBOURG, JUNE 29, 2016: The seat of the European Parliament. by Marco Aprile for shutterstock. EDITORIAL USE ONLY
Plan b, image via Shutterstock
EU workers, new markets: post-Brexit pressure on May & Co
Tough question, pic via Shutterstock