July 18, 2019

NFB: suspensions are good but the Prompt Payment Code needs financial penalties to be meaningful

The announcement to suspend or remove some of the worst offenders follows chief executive of the NFB Richard Beresford’s call to action for the Government to show the industry its teeth in enforcing existing payment legislation and policy to promote greater fairness across the supply chain and increase confidence in the construction industry.

The prompt payment initiative coming into force in the autumn is being promoted as a commitment from government that they will only do business with companies who pay their suppliers on time.

Currently the Prompt Payment Code, in which firms pledge to pay 95% of all supplier invoices within 60 days, is voluntary.

Commenting further, Richard Beresford said: “A few days of negative publicity, whilst good, won’t hit these late payment offenders where it hurts. A financial consequence such as denying access to public contracts is the only way to make them sit up and listen. We await autumn’s initiative to see if the government can really put its money where its mouth is.”

The Government has only gone so far as to say companies who fail to demonstrate fair payment practices to their suppliers “could” result in them being prevented from winning government contracts, rather than ‘will’.

The seven businesses suspended from the code have been invited to produce a plan setting out how they will achieve compliance within a set time period. Once these agreed compliance terms are met, members can seek reinstatement. However, if they do not, the suppliers will be removed.