Late payment – ACE asks where the urgency is in 2015?

What is happening with late payment? ACE sums up the current scene and calls for a tougher supply chain payment charter.

Since the election ACE has been waiting to see how Government’s level of active engagement on the persistent issue of late payment would change. 

The newly strengthened Prompt Payment Code is coming into force in phases, building up to full enforcement powers by the Code’s Compliance Board in April 2016.  This coincides with the published timetable to put into effect the statutory duty on large businesses to report bi-annually on their payment practices, although regulations will first need to be brought before Parliament. 

"We would really question the effectiveness of  ‘softly softly’ measures that focus on naming and shaming" - Nelson Ogunshakin 

Meanwhile, the Government is consulting on bringing in an advisory and conciliation service led by a small business commissioner to give small businesses a source of support with unfair business practices, particularly payment.  It is not apparent that the service will have any enforcement powers and we await to see how this develops.  It is not clear either why the service needs to be limited to small businesses and not available to medium sized businesses as well?

ACE legal and compliance director Dwight Patten commented: “On the one hand it is good news to see consistency in the various legislative initiatives and codes of practice introduced recently in the realm of business to business contracts, encouraging a move toward 30 day payment periods as the normal aim, and in any event not less than 60 days. 

"In the construction sector context we encourage the Construction Leadership Council to align with the Prompt Payment Code and move toward a tougher Supply Chain Payment Charter comprising a 30 day payment norm with immediate effect backed by monitoring and enforcement.  We also hope the new commissioner role will have some teeth.   

"Generally, we need to see the initiatives to date in light of the fact that the construction sector has, according to the Insolvency Service, been the worst affected by liquidations since Q2 2010.  Adequate cash flow is clearly a key factor to managing the insolvency risk; this leads back to what can be done about late payment. 

Nelson Ogunshakin, chief executive of ACE said: “Cash-flow management is critical to any successful and sustainable business. Given the damage being suffered by the sector we would really question the effectiveness of  ‘softly softly’ measures that focus on naming and shaming.  Instead, is this not the time for hard and fast rules on latepayment?  We are keen to hear from Government and the newly restructured CLC as to how the late payment culture can be eradicated to mitigate long term damage to the UK industry."