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Economy Economy

Ensure that big contractors comply with the Prompt Payment Code

Last updated: 06:25pm 4 October 2019

We also recognise that government can improve the general business environment for SMEs, so we will use our buying power to ensure that big contractors comply with the Prompt Payment Code both on government contracts and in their work with others. If they do not do so, they will lose the right to bid for government contracts.

Conservative Party Manifesto 2017, p.21

Our verdict

It is estimated that small and medium-sized enterprises (SMEs) in the UK are collectively owed more than £26 billion in overdue payments. The Prompt Payment Code is a voluntary code that commits suppliers to paying 95% of invoices within 60 days, whilst also working to achieving this within a 30-day period. It is administered by the Chartered Institute of Credit Management (CICM) on behalf of the Department for Business, Energy and Industrial Strategy (BEIS). This policy is a promise to ensure big companies that take on government contracts comply with the code, or face penalties.

Within a month of the 2017 general election, the government announced that 32 of the biggest suppliers in the public sector had committed to the code. The signatories typically held contracts with the government that surpassed £100 million, together accounting for 40% of government procurement spend.

The government continued to review the code and in November 2018 announced that from September 2019, organisations bidding for government contracts over £5 million per year would be required to provide confirmation that they have systems in place to ensure their supply chain companies are paid on time, as well as prior evidence of paying invoices within 60 days.

In July 2019, the government suspended 18 companies from the Prompt Payment Code for failing to pay suppliers on time. The number of suspended signatories currently stands at 22.

Given that the government has lowered the contract threshold to £5 million to protect more SMEs in the supply chain, and has actively suspended companies that don’t pay on time, we are marking this policy as ‘done’.

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