As far back as 2013, we said in a press release titled ‘Government is letting small to medium size businesses down’ that the Prompt Payment Code needs a complete overhaul as it clearly isn’t fit for purpose. We also said that it needs to be given real powers to be able to act effectively on behalf of SMEs.
In the same year, we issued another statement calling for the Prompt Payment Code to be scrapped.
Well, six years later and our calls to have the code finally called to account have at last been heeded. The Prompt Payment Code has been publicly criticised for being far too slow to react when large corporate members have been accused of mistreating smaller suppliers.
And some of these companies are household names, like BT, Prudential and BAE Systems which, belatedly, were suspended from the code for failing to pay their suppliers within agreed terms.
And their lies the crux of the problem. The Prompt Payment Code is so effete and ineffectual, that companies could join and continue to flout agreed terms or impose extended and unfair terms on their suppliers while still enjoying all the reputational benefits of membership.
If the Prompt Payment Code is to work and be seen to be working, then a complete overhaul is necessary. It needs to be given full responsibility for decision making so that companies know that if they flout the rules, they will be publicly named and shamed. They should also face painful sanctions including being fined.
Perhaps a good starting point would be to define ‘prompt’ because in our view, paying on sixty, or ninety days is not prompt, not by any measure.
We thoroughly welcome the news that the code is being taken over by the Small Business Commissioner and that more power will be given to Paul Uppal and his team to, hopefully, devise a completely new code, one that has real teeth and is willing to bite.
Businesses should be proud to be members of the Prompt Payment Code and fearful of being removed.
In order for this to happen effectively, the office of the Small Business Commissioner needs to be staffed appropriately and fully resourced to meet the challenge that a change in our unacceptable late payment culture requires.
One final point. When Carillion, which had been awarded ten of millions of pounds in government contracts (funded by the taxpayer,) went bust, around 30,000 companies and suppliers faced losing £1 billion in unpaid costs. Thousands of jobs and pensions were put at risk.
Well, at the time, Carillion was a member of the Prompt Payment Code!
Luisa Grey, Director at Eazipay Ltd