At an APSCo (Association of Professional Staffing companies) Members’ event last week, Laurence Ridgway, Senior Policy Adviser at the Department for Business Innovation and Skills (BIS), outlined the Government’s response to a consultation entitled “Building a Responsible Payment Culture”.

The consultation asks what government, businesses, and other stakeholders can do to build an environment where businesses treat their suppliers fairly, and accept their obligation to pay what they owe, when they owe it, without over-burdensome enforcement.

Fiona Coombe, Director of Legal and Regulatory Research at Staffing Industry Analysts, who attended the event, commented: “The issue is a serious one for small businesses and the UK economy leading to problems with cash flow and risk of insolvency. According to statistics cited in the Government document issued in December 2103, 80% of business-to-business transactions in the UK operate on trade credit, and trade credit accounts for 37% of total business assets.”

“As of February 2013, the overall level of late payment owed to small and medium sized businesses stood at £30.1 billion. Legislation has been in place since 1998 permitting businesses to charge 8% interest on overdue payments, while EU Directives impose a default 60 day payment maximum unless otherwise agreed, but these measures are rarely used in practice,” she added.

BIS launched the consultation at the beginning of the year. It has already published its initial response, which includes a reporting requirement for large listed companies and Limited Liability Partnerships (LLPs) to report on their business contract payment practices and policies. However, Mr Ridgeway explained that he was very keen to hear directly from APSCo members as part of a further consultation. 

Mr Ridgeway explained that as well as mandatory reporting, contravention of which will incur a criminal conviction and fine, the Government is also working with the Institute of Credit Management to strengthen the Prompt Payment Code and is planning legislation to tackle bans on assignment that prevent access to invoice financing.

Mr Ridgeway joined a panel, which included Alistair Dobson, Director of Hyphen Workforce Solutions; Jeff Longhurst, CEO of the Asset Based Finance Association (ABFA); Philip King, CEO of the Institute of Credit Management; Richard Herring, Managing Director and Senior Vice President at Volt; and Tom Thackray, Senior Policy Adviser at the CBI.

The panel debated the merits of introducing legislation over voluntary codes to regulate payment terms between businesses.

Commenting on the discussion, Mr Ridgeway said: “This has been really helpful for me and has given me pointers as to what some of the metrics around reporting requirements should be.  Also, hearing about issues around pay when paid clauses has been very interesting indeed.”

Samantha Hurley Head of External Relations and Compliance said: “We are very pleased that BIS has taken the time to engage with our members directly on this very important issue, and that they recognise that the need to have a sector based approach. We were particularly pleased that BIS  said that they would like companies to link to sector based codes such as the APSCode,  a code of conduct for RPO (Recruitment Process Outsourcing) and MSP (Managed Service Providers) members which addresses some payment culture issues, in particular pay when paid clauses and non-assignment of debt.”