Research carried out by online business finance supermarket Funding Options has suggested that UK small and medium-sized enterprises (SMEs) have to wait an average of 43 days to be paid by government contractors.
Funding Options found that top government contractors took more than six weeks to pay their suppliers in 2017.
It warned that late payments can help to push small firms into insolvency. According to Funding Options, late payments have played a significant role in generating construction sector insolvencies: in the year to September 2018, 2,924 construction firms were declared insolvent – a rise when compared to the previous year’s figure of 2,645.
In 2015, the government vowed to pay 80% of its invoices in five days, and the rest within 30 days. However, the research has suggested that government contractors are failing to meet this target.
Commenting on the issue, Phil Hall, Head of Public Affairs and Public Policy at the Association of Accounting Technicians (AAT), said: ‘Government action to tackle this problem, from the voluntary payment code to compulsory but feeble reporting requirements – as well as the creation of a Small Business Commissioner with no real power – have all predictably failed to stem the scourge of late payments.’