Subbies pressure ministers to tighten prompt payment code

The National Specialist Contractors’ Council (NSCC) has told business minister Michael Fallon to tighten the government’s Prompt Payment Code to stop firms with payment terms longer than 60 days signing up to it.

The Prompt Payment Code is a voluntary scheme to promote best practice among main contractors. Those that sign up to the scheme agree to pay within the terms of their contract and not extend payment terms on unreasonable grounds.

Now, NSCC chief executive Suzannah Nichol has written to Fallon to ask that this be modified to include a provision to ensure payment terms are no longer than 60 days to bring the code into line with the Late Payment of Commercial Debts Regulations, which were introduced last month.

The regulations state payment terms should not exceed 60 days without the express agreement of both parties and must not be “grossly unfair”.

The NSCC’s desire to see the code tightened has been sparked by Carillion’s decision to extend its standard payment terms to 120 days as part of the complex payment system.

Nichol’s letter said contractors were “clearly” implementing systems “which result in them holding onto payments received for a considerable period of time”.

She added: “It is disingenuous that companies such as Carillion that implement 120-day payment terms are able to sign up to the current Prompt Payment Code and claim government support for their payment practices.”

Nichol also called on the government and local authorities to stop awarding work to firms with payment terms over 30 days.

She added: “If the government is truly committed to good business practices including fair payment, then it must surely act now.”

A Carillion spokesman said he was “surprised” by the NSCC’s comments because Carillion had not had any contact from NSCC on the issue.

He added: “Had they done so, we would have explained how our Early Payment Facility works to the benefit of our suppliers, as evidenced by the positive feedback we have received from suppliers, some examples of which are on our website, saying how well this is working for them in terms of being paid earlier than under their previous terms and at no cost to themselves.”