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Government gets tough on late payment (again)

London, UK (20/07/2011)

LONDON (Management Today) Cabinet secretary Francis Maude has brought in new late payment measures for Government suppliers. It's a start, we suppose...

Blimey, that was fast: it’s just two weeks since shadow small business minister Chukka Umunna criticised the Government over the ‘scandal’ of late payment, but the Coalition has displayed reflexes almost as speedy and impressive as Wendi Deng on the matter. Cabinet Secretary Francis Maude has just announced a raft of measures designed to ensure the Government's own suppliers, at least, pay on time. Credit where it’s due (so to speak). To be fair, it’s an issue on which the Coalition has a pretty good track record; but can it benefit the wider economy?

According to Maude, the new rules will mean the Government's largest contractors will have their payment records closely monitored by the departments they serve, while small businesses working with the contractors in question will be ‘encouraged’ to report bad payment behaviour using a Mystery Shopper-style service; the complaints will then be published on the Cabinet Office website. Other new measure involves the Crown Representatives team, which co-ordinates key suppliers to the Government: apparently, this will ‘strongly encourage’ contractors to pay more quickly than 30 days.

There’s no question late payment is a growing problem: according to a survey by Sage last month, more than a third of small businesses believe payments have got even later over the past six months, while the FSB says that the total amount owed to small businesses stands at £24bn. Not exactly small change.

Now don’t get us wrong: any attempt to lead by example is, obviously, laudable (and it’s certainly already doing that: apparently, its average payment period is just 10 days). But the problem’s widespread – and if the Government truly wants to create a sea-change in the way businesses pay, suggesting that its suppliers, er, might, um, like to, er perhaps, think about, er, paying up sooner, probably won’t have the desired effect on non-Government suppliers. Although, as Tesco likes to say, every little helps - right?

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