FSB: Government still fails to pay on time, with one in three payments from the public sector being made late, FSB-ICM report shows

FSB and ICM launch full results of the most extensive survey of the small business sector during the recession, with 10,000 small firms responding

Government and its agencies are still paying small businesses late despite making commitments over a year ago to pay within 10 days, the FSB-ICM ‘Voice of Small Business’ Annual Survey report shows.

The report found that local Government is likely to pay one in four invoices late, and central Government and Government agencies make one in three payments late. This is despite putting a Prompt Payment Code in place and central Government promising to pay within 10 days at the start of the recession in 2008.

Small businesses have faced a challenging year, with over half (52%) of those surveyed reporting that profits had fallen in 2009. As the recession took hold all businesses felt the pinch, however it is the small business community which bears the brunt of this practice and are leaned on by big businesses which continue to pay late. The survey shows UK central Government (31%), Government agencies (30%), EU institutions (30%), NHS (29%) and local authorities (25%) all put the pressure on too, despite promises to the contrary. Thirty four per cent of payments from the private sector are late according to the survey.

Frustratingly, many businesses have had to resort to using their own long and short-term finance. The survey shows that 41 per cent dipped into personal savings and 43 per cent used their overdrafts last year. Twenty one per cent used a personal credit card. This may be an indication of self-reliance as they encountered a banking sector which refused to lend.

While large firms have sufficient reserves to cope with late payments, a small business relies on payment within the agreed timescale to ensure it has a steady cash-flow.

The FSB is now urging Government to take the lead in tacking this problem by implementing a ‘Social Clause’ in national and local Government contracts. This relies on the Government stepping up its game, paying swiftly and then giving a guarantee that when the Government pays the lead contractor quickly, this is passed down the supply chain to all sub-contractors – with penalties attached for persistent non-compliance.

John Wright, National Chairman of the Federation of Small Businesses, said:

“It is shocking that after the Government put the Prompt Payment Code in place so many businesses are still being paid late. The public sector needs to take the lead in more than word alone and set an example that paying late isn’t acceptable, as this problem persists in the private sector.

“Small businesses rely on receiving payments within the timescale agreed to maintain cash-flow to ensure the business can run on a day-to-day basis. This is why the FSB is calling for the introduction of a ‘Social Clause’ in all Government contracts.

“However, this clause must have teeth, and any business found to persistently breach the terms should be fined and be warned they may lose contracts in the future. This will give small businesses confidence and go far to change the poor record of behaviour on this issue.

“Late payment is not a new issue, but it has been a particular problem in the past year and it is more important than ever that this worrying practice is brought to an end.”

ENDS

Notes to editors

1. Full late payments results

Businesses were asked whether they received payment from the following list of organisations early, late or on time. These are the ‘late payment’ figures:

Police/fire 18%
School/university/college 22%
Devolved Government 23%
Olympics 2012 25%
Local authorities 25%
NHS 29%
Government agencies 30%
EU institutions 30%
UK Central Government 31%
Private sector 34%

2. Other key findings in the report

28 per cent of members surveyed believe the business environment will improve in the next 12 months
Only 13 per cent of members who have borrowed in the last year believed that interest rates on new lending had decreased despite the base rate being at an all time low
53 per cent have introduced new or improved products or services in the last 12 months and a similar proportion (51%) believe they will do in the next 12 months
34 per cent believe that a cut in business rates would help to improve the economic prospects of the business with 31 per cent citing a cut in employers’ national insurance contributions

3. The FSB is the UK’s leading business organisation with over 213,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk

4. The research was undertaken using a self-completion methodology (postal and online) between September and October 2009, and 9,761 responses were received. The study was carried out by ICM Research on behalf of the FSB

5. The 9,761 respondents cover all UK regions and most business sectors. A full copy of the survey report is available from www.fsb.org.uk and full results are available on the ICM website http://www.icmresearch.co.uk/media-centre.php

6. For details on the Prompt Payment Code, click here

Media contacts:

Stephen Alambritis: 020 7592 8112 / 07788 422155
Sophie Kummer: 020 7592 8128 / 07917 628998 sophie.kummer@fsb.org.uk
Prue Watson: 020 7592 8121 / 07825 125695 prue.watson@fsb.org.uk
Sara Lee: 020 7592 8113 / 07595 067068 sara.lee@fsb.org.uk