It’s potentially refreshing to hear among the flurry of announcements made by the new Government, that Sajid Javid has said he’s committed to making sure that government contracts and the whole of their supply chains now pay out monies due to businesses on time. In a speech at Bristol he claimed to have “brought in measures requiring all public sector contracts to pay out within 30 days”. But has this been happening in practice? Well, no.
Although we do already have a set of little-used regulations that should have ensured timely payment practices, delays by some government contractors, sub-contractors, Local Authorities and private companies are commonplace. I have personally seen many examples where operators of government-funded schemes withhold payments to companies who have been awarded grants long after the 30 days those companies had planned into their cashflow forecasts. You might expect this in unusual circumstances or as the result of occasional forgivable errors, but no- I see it as a matter of planned, routine practice. Some even get away with applying a MINIMUM time rather than a MAXIMUM time by which they will pay up- I can’t think of a more overt way of flying in the face of the late payment regulations than that!
Bearing in mind that almost all grants are paid as partial reimbursements against costs a business has already been encouraged to pay out, it is quite obvious that this practice causes financial hardship. This is exacerbated in the case of growth companies, where working capital is under pressure as a typical consequence of funding growth- the very objective that many government supported schemes are charged with delivering. Suppliers too (including myself) regularly experience government-funded companies as a matter of policy withholding payment well beyond 30 days.
So, will Javid’s new-found enthusiasm to eliminate this hypocrisy have any practical effect? Will the operators of government-funded business support schemes make it their target to pay out to small growing businesses as quickly as possible rather than as slowly as possible? Let’s see- I for one will certainly be keeping close tabs on how this pans out.