On Wednesday in Parliament a brief debate took place on the subject of ‘Prompt Payment Code’ which relates to the speed with which contractors pay their suppliers. One of the themes touched upon explicitly by several MPs was the issue of contracts being awarded to and then payments being made on time to ‘small businesses’. One of these MPs was Neil Parish, Conservative for Tiverton and Honiton, who referred to small and medium sized businesses in the same breath. The new Conservative MP for Chichester, Gillian Keegan was a bit more focused and referred directly to small businesses. For their part the Government represented by Minister, Caroline Nokes spoke of how over the past 2 years they had persuaded all 32 of the Governments strategic suppliers to sign up to the ‘prompt payment code’. She then went on to say “We are working to remove all barriers facing small and medium-sized enterprises bidding for Government contracts, and we are committed to increasing spend with SMEs, both directly and through the supply chain. We have also opened the free-to-use “Contracts Finder” website for suppliers to advertise subcontracting opportunities.”
As someone who help to run a small business (defined as employing 10-49 people) that has grown from being a micro enterprise (0-9 employees) I know that the scale of both types of businesses are dramatically different to a medium sized business which is defined as employing 50 – 250 people. The problem is that in our Government there seem very few people who really grasp how significant the difference is between employing 9 people and 250 people. Every time people like Caroline Nokes and Neil Parish speak about this subject, we are left assuming they are referring to businesses that employ around 200 people rather than ones that employ around 20 people. Yet the difference in terms of the economy is huge. There are around 5M micro enterprises and 195,000 small businesses in the UK who between them employ just over 12M people (48% of the working population). The number of medium businesses in the UK is a mere 31,000 and they employ a further 12% of the working population. It is vital that all Governments consider their procurement focus and ensure that they don’t hand out contracts in a way that advantages large businesses. Procurement frameworks so often depend on businesses possessing large sums of insurance, simply to be included in the list of possible providers. It can depend on all sorts of other factors which have no bearing on the ability of the company to deliver on time and within budget. One of these is the idea of holding retention against the final contract sum of say 5% or even 10% for a year until the warranty period is expired and until all of the snags have hopefully been ironed out. The only way for a business to survive such an arrangement is to borrow the 5% or 10% and add the cost of such borrowing onto the contract. Alternatively they could add 5% or 10% onto the cost of the contract. Such arrangements can be far more damaging than late payments.
We need a Government made up of more people like Gillian Keegan who are willing to speak up on behalf of small and micro businesses. Medium businesses should not be ignored, but they are much better capable of speaking up on their own behalf than the small and micro businesses. We need to ensure that the FSB is heard more regularly than either the IOD or the CBI whenever the Government or media want to speak to business leaders. However we also need them to speak directly to businesses, as many micro enterprises are not members of any of these institutes. We also need the Government to list their 32 strategic suppliers so that if any of our businesses get caught out with bills unpaid we can complain to Caroline Nokes. The Prompt Payment Code website lists just under 2000 businesses which represents over a quarter of large businesses if all signatories are large businesses, but around 0.04% of businesses as a whole. To extend this campaign will demand more than the offer of a logo on a company website. What about the Government persuading the Insurance Industry to offer a discount to all PPC signatories on the ground that if they pay their bills efficiently they are almost certainly running the rest of their business in an effective manner?