MP backs move to protect payments to small businesses

Shadow Business Minister Bill Esterson is backing a new scheme to ensure small businesses are paid on time.

The MP for Sefton Central said late payments were a scourge for small businesses and could even lead to firms going bust.

The MP is backing a new law that would mean payments on government and public authority contracts would be paid directly and on time from the same secure "pot" of money.

The ten minute rule bill, titled Public Sector Supply Chains (Project Bank Accounts) Bill - was presented in Parliament last month (January 15) by Labour MP for Oldham East and Saddleworth, Debbie Abrahams, with cross party support.

The bill aims to set in law the requirement that parties delivering government and public authority work – from the lead contractor right down the supply chain – would receive payment from the same secure ‘pot’ of money, the "project bank account".

Mr Esterson said: “I’m supporting this ten minute rule bill because it is only right that government and public authority projects should be setting the standard for making sure that supply chains are paid promptly and on time for work done. Project bank accounts for major infrastructure projects are one way to ensure this happens.

“Late payment by large businesses is a massive issue across all business sectors leading to billions of pounds being owed to smaller companies for work that has been done.

"Late payments are a scourge for small businesses and can even lead to firms going bust if they do not receive the money they are owed in an appropriate period of time.

“When payments take a long time working their way along a supply chain from the contracting government department or public authority there is a risk that the cash could be cut off at any time because of payer insolvency, as happened with Carillion last year.”

Rudi Klein, Chief Executive of Specialist Engineering Contractors’ (SEC) Group, which represents the interests of the specialist construction contractors across the UK, is a leading late payments campaigner and advocate of project bank accounts.

Klein said: “Given the precarious financial state of many of the UK’s major contractors Debbie Abrahams’ bill is now extremely timely.

“SMEs in construction supply chains have had to put up with payment abuse over many years and project bank accounts are now acknowledged to be the most effective method of ensuring secure and regular cash flow.”

Martin McTague, Federation of Small Businesses, Policy and Advocacy Chairman said: “The scourge of late payments causes untold misery for thousands of small business owners, their families and their staff.

“Government, as a customer, should setting a good example here by using project bank accounts for major public procurement contracts. At a stroke this would prevent small suppliers going bust through no fault of their own, where a contractor goes bad – as happened with Carillion one year ago.

“It is right and proper that there be cross party support for this bill. The fact is Whitehall simply doesn’t use project bank accounts nearly enough – that needs to be fixed.

“Projects that use taxpayers money should be spent to the standard taxpayers expect, not hoarded by prime contractors. MPs that support project bank accounts are standing up for small business.”