Five IT contractor clients feature on late paying ‘blacklist’

Major clients of IT contractors today find themselves in the unenviable position of featuring on a new ‘blacklist’ of large organisations which are failing to pay small suppliers on time.

Fujitsu Services, BT, Centrica, BAE Systems and Prudential -- parent company of M&G Investments, are among 18 organisations suspended or removed for flouting the ‘PPC.’

Administered by credit body the CICM, the Prompt Payment Code  (PPC) requires companies which voluntarily join it to pay 95% of all suppliers’ invoices with 60 days.

'Encouraged'

In the first quarter, Vodafone and Atos were the biggest companies in the IT sector to fail this requirement, but the latter has now been reinstated, CICM’s Philip King said yesterday.

“We are encouraged that of the 18 who have been suspended or removed”, he added, alluding to firms in Q2, “all but one has already submitted action plans to achieve future compliance.”

But commending companies so soon after they treated suppliers poorly would risk undermining the process of removing them, temporarily, from the voluntary code.

'Struggling'

“[As a result], we can't help but wonder how much of a practical impact these recent suspensions will have,” says Adam Home, managing director of Safe Collections.

“We also wonder how news of their suspension or removal will be received by the creditors currently struggling to get their invoices paid on time from these organisations.” 

IPSE says its thoughts are also with the people on the receiving end of not being paid on time for services rendered -- potentially some two months ago, given that the PPC affords 60 days.

'Uniquely vulnerable'

“The self-employed are uniquely vulnerable to late payment, if they aren’t paid on time they have no income,” said IPSE’s Andy Chamberlain.

“Freelancers regularly tell me about the real damage this causes to their businesses and lives, with 20 days on average wasted a year chasing”.

The solution to head off late payment’s consequences, which IPSE says range from missed rental fees to bankruptcy, is for government to “push ahead” with its September reforms.

'Expected to answer questions'

Under them, subcontractors will get "greater access" to report poor payment practices, and the showpiece is quizzing lax suppliers and threatening them with contract removal.

Cabinet Office minister Oliver Dowden said upon seeing the CICM’s data: “From September 1st, any supplier who bids for a government contract above £5m per annum will be expected to answer questions about their payment practices and performance.

“If they are unable to demonstrate that they are paying 95% of invoices within 60 days, they may be excluded from the process.”

'Stopping short'

But Mr Home was unmoved, saying: “While the government continue to make all the right noises about the scourge of late payment on British industry and competitiveness, we note that minister stops short of confirming that companies who do not pay on time will be barred from bidding on government contracts of over £5million and states only that ‘they may be excluded.’”

Small Business Minister Kelly Tolhurst MP has described the government’s late payments reforms as “ambitious.”

“[The reforms will] level the playing field for small businesses as part of our modern Industrial Strategy.

“These include plans to hold company boards accountable for payment practices and proposed new powers for the Small Business Commissioner to tackle late payments through fines and binding payment plans,” she said.

'Lead the charge'

Making the reforms even more ambitious is what Safe Collections wants to see, however.

The firm said: “In our view government should be leading the charge against late payment and insisting that all bidders for government contracts, irrespective of their value, are vetted to ensure they abide by the letter and the spirit of the PPC.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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