Balfour Beatty is due to appear next week before a parliamentary committee investigating late payment – alongside a former subcontractor which last year publicly announced it would no longer work for the main contractor over difficulties in getting paid.
The inquiry has been set up by Labour MP Debbie Abrahams, who has been campaigning for better payment practice across the economy since 2011.
A representative of Balfour Beatty and Steve Sutherland of Dortech are set to appear in front of a cross-party group of 10 or 11 MPs with a declared interest in payment issues.
The inquiry plans to “consider the issues associated with late payments to small businesses, including the macroeconomic effects, and to develop recommendations to address these issues”.
The inquiry will hear from four groups – SME suppliers, FTSE listed client companies, academics, and organisations representing small businesses – in a three-hour evidence session on Tuesday 23 April.
One academic due to give evidence is Ann Pettifor, a fellow of the New Economics Foundation, who will given an overview on the overall economic impact of late payment.
The inquiry will also examine the controversial Prompt Payment Code, run by the Institute of Credit Management and backed by the government. It has been criticised for endorsing companies that pay according to the contract terms – but those terms could be 60 days or more.
In a statement, Debbie Abrahams said: “SMEs across the country are suffering acutely as a result of late payment, with many firms’ survival being put at risk by cash flow problems, with total outstanding funds owed to them amounting to £30.2 billion.”
A spokesman for the Forum of Private Business, which will also attend Tuesday’s session, said that it would raise the issue of what it calls “invoice haircutting” – a growing practice in the retail sector whereby suppliers are offered early payment in return for sacrificing 2-5% of the invoice value. However, it says it has seen a case of high-street retailer expecting a 10% cut.
“Selfridges is the most recent case we’ve helped to expose just this week, but Sainsbury’s implemented a similar scheme last October,” he said.
“Sainsbury’s also used to pay suppliers within 30 days, then they extended terms to 75 days and signed the Prompt Payment Code.”
He also raised concerns that the spread of “invoice haircutting” shows how the government’s Supply Chain Finance initiative – which also underpins Carillion’s controversial new Early Payment Facility – is open to abuse. “We warned about this at the time [last October]. There are more examples coming to light across all sectors at the moment.”
