Official figures show that the majority of government departments pay main contractors within 10 days, but that this is not always being passed along the supply chain.
According to the Forum, some subcontractors and suppliers have been left waiting months for payments.
Matt Goodman, the Forum’s Head of Policy, said: “Passing on prompt public sector payment through the supply chain would not only help small firms maintain a healthy cash flow, it would encourage more businesses to bid for public contracts.”
He emphasized that the issue is not confined to any one sector, adding that work needs to be done to ensure that timely payment becomes “the norm” in the UK.
“The risk is that more firms go under because they are unable to maintain any kind of cash flow because of late payment from larger companies,” Goodman said.
The Forum has campaigned extensively against the practice of late payment and was responsible for lobbying for the Late Payment of Commercial Debts (Interest) Act, introduced in 1998.
Its work also led to the implementation of the Prompt Payment Code which comprises a list of companies pledging to pay smaller suppliers on time and in full.
Eleanor Grant of EG Heating and Plumbing Ltd, the firm she runs with her husband, told the Forum: “While we welcome the commitment to reduce public sector payment terms, this doesn’t always work in practice.
“In addition, most contracts are subject to 5 percent retention, with 2.5 percent released on practical completion of the works. The defects period on Government contracts can be as much as 36 months.”
However, Grant remains supportive of the Forum’s commitment to name and shame those companies who delay payment to suppliers.
“The Government must listen to the voices of SMEs, which are the lifeblood of the economy and are struggling to stay afloat because of the effects of the recession,” added Grant.
Edited by Jennifer Denby