Game-Changer or Gold Medal Farce?

Prime Minister Sir Keir Starmer has promised to "stamp out late payments". Sounds great. But will his proposals make any difference whatsoever?

This Autumn, the Labour Government is planning to launch a new Fair Payment Code that will replace the old Prompt Payment Code that was about as much use as a chocolate fire-guard.

Prime Minister Sir Keir Starmer is apparently taking a personal interest in this. He says:

“We’re determined to back small businesses by unlocking their barriers to growth. And stamping out late payments is at the heart of this. We know how important it is for business owners to have the peace of mind and certainty around their cashflow to keep their businesses alive. Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse. After years of delay, we’re bringing forward measures that small businesses have long been calling for to tackle late payments once and for all.”

Sounds great, right. Who wouldn’t want to be paid more promptly? And, given the collapse of ISG and the repercussions that will assuredly hit the wider industry supply chain, Starmer’s timing is superb.

So what are these measures of which he speaks? Naming and shaming tardy payers? Blocking late paying companies from Government tender lists? Public lynchings?

No. It is none of these things.

Instead, companies will be “encouraged to pay faster more often” by being awarded Gold, Silver of Bronze medal status.

Companies paying 95% of their suppliers within 30 days will be granted Gold Medal Status. Companies paying 95% of their small business suppliers within 30 days and all other suppliers within 60 days will be given Silver Medal status. And those companies paying 95% of suppliers within 60 days will be Bronze Medal status.

Yes. You did read that right. We are going to grant medal status to companies for doing what they are already obliged to do, both legally and morally.

Now, a couple of things.

I guess if you are made aware that you’re about to work for a Gold Medal standard settler of bills, that will offer you a degree of reassurance. If you’re a small business, the unspoken promise of getting paid within 30 days might be enough to make you consider working for a silver medal firm. Hell, even a bronze medal status company looks like they might pay their bills within a couple of months.

But what about the rest? What about those that aren’t within the scheme? For every Gold Medal company, there are dozens and possibly hundreds that pay up only when a court order insists they do so. Companies that will use all means at their disposal – fair and foul – to ensure that they pay only the barest minimum, as and when they’re ready to do so.

Let us not forget that we have been here before. A few years ago, Build UK instigated their own fair payment scheme and they badgered and cajoled all their members to sign up to a faster payment pledge. A year later, they went back to see just how many of their members had abided by that pledge. The answer? None. Not one.

And that is indicative of the wider malaise when it comes to late payment. They will look you in the eye and assure you you’ll be paid on time and in full. They will tell their trade association precisely the same thing. If Sir Keir Starmer were to visit a UK demolition or construction site, I’m sure they could – with a straight face – reassure him that one of their great pleasures in life is paying bills.

The fact is, large parts of the demolition and construction business is built upon false promises and deceit.

Before a contract begins, you’re told you have four weeks to complete the work. As soon as the contract begins, you’re being chased to complete it in two.

You’re told there will be stage payments. But some of those stages are not forthcoming as the client decides to pay upon completion instead. And then, when completion comes around, they will play the retention card and still hold onto some of your money.

Every time there is a recession or a downturn in work, those at the top of the construction tree push out their payment terms just a bit further. 30 days becomes 60. 60 days becomes 90. 90 days becomes “when we feel like it”.

And where does all this leave us? It leaves us with good honest companies like Redhead Demolitions going under because someone higher up the supply chain didn’t pay them and then went pop. It leaves us with ISG becoming the latest major contractor to join Carilion in the industry dead pool and potentially taking many more with it.

But hey, look on the bright side, it leaves us with a scheme in which companies get to wear a shiny gold medal if they actually settle their bills on time.

I am certain that will reassure the entire industry.