A new prompt payment initiative will ensure that all government suppliers and subcontractors get paid on time.

Failure of companies to show that they pay their suppliers promptly could stop them from winning government contracts in future.

Deciding who the government does business with

Coming into force in autumn 2019, this initiative will ensure the government only does business with companies who pay their suppliers on time, many of which are small businesses.

Cabinet Office minister, Oliver Dowden, says that companies providing crucial services to the public sector must be paid on time.

Martin McTague, policy and advocacy chairman for the Federation of Small Businesses (FSB), says that this measure will get the thumbs up from the small business community.

‘This sends a clear message from government that paying late is not okay.

‘Cracking down on big businesses supplying to government, and not paying on time, is a win for small businesses, taxpayers, the wider economy and public services.

‘Measures to open up public procurement give taxpayers and our public services access to the innovation and value small firms bring, as well as helping our economy. This is a challenge, and there is, of course, more to do, but FSB recognises the policy progress that is being made.’

James Roberts, political director of the TaxPayers’ Alliance, adds,

‘In the past, bigger contractors have dragged their feet when paying smaller suppliers, causing them cash flow problems and leaving SMEs hesitant to take the work.

‘Making the process more small business friendly delivers the double whammy of driving down costs and supporting enterprise. Taxpayers should welcome these changes, which will ultimately mean more competition, lower costs and better services.’

Research from Sage shows that the UK has the highest proportion of invoices that are paid late in the world: 17 per cent of all invoices to small and medium businesses aren’t paid on time. Last year, businesses spent on average 15 working days chasing late payments.

Public procurement review service

To demonstrate the government’s commitment to helping small businesses and to mark Small Business Saturday, it will also update its supplier complaints service to ensure business voices are heard.

Formerly called Mystery Shopper, the free and anonymous complaints service – now called the Public Procurement Review Service – helps suppliers of all sizes raise complaints and concerns about procurements they’re involved in or about the conduct of contracting authorities.

Since 2011, the service has helped speed up payment of over £5.2 million stemming from government contracts.

It follows the government’s further measures to level the playing field for small businesses bidding for government contracts.

This includes the ambition to pay 90 per cent of government’s undisputed invoices within five days and requiring suppliers to advertise opportunities worth over £5 million on the Contracts Finder website.

What’s more, the Prime Minister has appointed a Small Business Champion minister in each government department to oversee a robust action plan to help towards their goal of spending one pound in three with SMEs by 2022.