Government fails to pay up on time

Jun 19 2009 by Iain Laing, The Journal

AT a time when businesses in all sectors are working around the clock to keep work and money coming in, companies need all of the help they can get from the Government.

So, you can imagine, when Lord Mandelson pledged in October 2008 that central government would pay its suppliers within 10 days, the business and enterprise secretary's words were warmly welcomed.

But it seems from a survey carried out by the Heating and Ventilation Contractors Association that this pledge was simply words. Its findings showed that around nine out of 10 heating and ventilating contractors working for public clients said the Government had failed to live up to its own guidelines.

As a result, the association is calling upon Construction and Business minister Ian Pearson to publish official payment statistics.

The HVCA members survey, carried out in quarter four of 2008 and quarter one of 2009, showed only 12% were receiving their payment from public clients within the 10 days. While 39% had to wait at least 30 days, 8% were still awaiting payment after 60 days.

This disturbing extra blow to confidence in public sector payment comes alongside news that small and medium sized firms in the construction sector are owed £2.5bn on any given day because of failure to be paid on time.

Barclays Local Business' annual Late Payments survey showed that, on a typical day, construction firms in England and Wales are £2,837 out of pocket because of customers or suppliers failing to hit 30 day payments.

The danger of late payment – from clients in any sector – can not be underestimated. Four in ten of those construction firms interviewed by Barclays said the delays threatened their day-to-day survival, according to marketing director John Davis.

Typically, it took until 13.3 days after the invoice due date for payment to arrive, while firms were spending 1.4 hours a day chasing late payment.

Smaller firms in particular can count that time as eating into the hours they have available to be working to keep afloat.

With 65% of the firms stating they thought the problem was likely to get worse in the next 12 months, the future looks bleak for many.

With this in mind, I think Lord Mandelson needs to take a long hard look at his pledge and those whose responsibility it is to actually ensure it is delivered.

It is bad enough for a global economic crisis to be threatening businesses, but when our own government is helping to push them over the edge, it is simply unacceptable.

For more information on Constructing Excellence in the North East, please contact chief executive, Catriona Lingwood, on (0191) 383-7435 or catriona@cene.org.uk .

Catriona Lingwood is chief executive of Constructing Excellence in the North East