UK payments culture: enough is enough

The dramatic fall of Carillion exposes the fundamental flaws in the UK economy – that of supplier payments. Last Monday when the news broke, stories of its cleaning company contractors having their corporate cards bounce at petrol stations embodied the economic fallout.

The company has estimated debts of £1.5 billion and businesses – many of them small – are worried that they won’t get paid. Government support for the private sector is sparse at best. Those involved in public sector contracts have reason to be cautiously optimistic, as at the time of writing support was to be offered. For the private sector, the impact was quick.  One business owner told the BBC that if his £80,000 invoice wasn’t paid he feared the consequences for his business.

In anyone’s book £80,000 is not an insignificant amount of money, but to a small business that’s the difference between trading or shutting up shop. Carillion might employ 20,000 people but many more will be worried for their jobs; trade body Build UK estimates that between 25,000 and 30,000 businesses are owed money. Payment certainly won’t be prompt and might not even come at all.

The news lays bare the nonsensical payments culture that is the fragile, brittle back bone of the UK economy. And how small companies are the most vulnerable to a culture where late payments are commonplace and supply chain bullying is the cost of doing business.

The Government’s entire industrial strategy relies on employment, ambition and – you guessed it – small businesses (SMBs). The strength of our economy depends on ambitious entrepreneurs taking bold risks in the hope of building something brilliant. But why should they, when there is nothing to protect them or their employees in times of crisis? In ten years, it seems we’ve gone from “too big to fail” to “too small to bail”.

It’s unacceptable on the one hand to laud SMBs as the engine room of the economy, but on the other be laissez faire at best about protecting their commercial interests. The writing has been on the wall for some time. Nothing was done and now thousands face potential unemployment. We have to change the payments culture in the UK, to one that is focused on prompt payment for small businesses and gives them more muscle, reassurance and access to emergency capital in times of crisis. Otherwise the engine room will run out of steam.