I have written to the Chancellor of the Exchequer, Rishi Sunak, calling for tougher measures to ensure that large firms pay their suppliers on time. The letter, which was also signed by 37 cross-party MPs and Members of the House of Lords, urges Mr Sunak to give the Small Business Commissioner the power to fine companies that consistently fail to pay suppliers on time and to make the Prompt Payment Code compulsory rather than voluntary for organisations with more than 250 employees.
Over the past few weeks I have campaigned on behalf of businesses for easier and more prompt access to bank loans to help them through this crisis. We must do everything we can to ensure they survive. These are very challenging times for small and medium size businesses (SMEs). Even before the outbreak the level of late payment was far too high and this pandemic has only worsened the problem. There is already great uncertainty for businesses with significantly reduced economic activity and without these payments some SMEs may have to lay off staff or, worse, go into administration. This is simply not right when some of the larger businesses are hoarding cash which they could pass on.
In our letter to the Chancellor we say that, whilst we fully support the unprecedented package of measures for businesses and employees, more could be done for SMEs. By ensuring that they are paid on time it would reduce the risk of bankruptcy or the need to take on government loans. We cite the construction giant Carillion, whose payment practice extended to 120 days, and which collapsed in 2018 owing over £2bn to 30,000 suppliers leaving many of them in dire straits. We argue that without action this could be repeated on a much bigger scale.