Majority of UKs local councils are breaching payment rules

overdue payment

The majority of local authorities are breaching their legal duty to ensure that their supply chain is paid promptly, making it harder for many thousands of small businesses to succeed, according to an investigation by the Electrical Contractors’ Association (ECA).

In late September this year, the ECA issued a Freedom of Information request to local councils in England about their payment practices, to establish whether they were meeting the requirements in the Public Contracts Regulations 2015.

The key findings found that: Over five in 10 councils (52 per cent) have not yet built in a contractual requirement for payment to flow thorough the supply chain within 30 days, as required by law. A further seven per cent say that they do not know if they do this.

Over one in four councils (28 per cent) say they ‘have not and will not’ be building in a contractual requirement to ensure the supply chain is paid on time.

Less than one in 10 councils (9 per cent) monitor and report on whether their supply chain is being paid within 30 days, in line with the law and the spirit of the law.

ECA director of business and external affairs Paul Reeve commented: “Our survey shows that many local authorities continue to ignore the legal requirements for prompt public sector payment along the supply chain. It’s particularly disappointing when one considers that doing so would support SMEs in their local areas.

“We have seen next to no improvement among many local councils since the ECA conducted a similar investigation last year. The government has issued regulations to help smaller businesses, but they are being viewed as optional by far too many councils, and too many are opting out.

“What we need is for government to approach those who flout the law and to make it harder for them not to comply, than to comply. The government could impose penalties to achieve this.”

In October 2015 the ECA also asked local authorities about their payment practices.

One year later, there has been an improvement in the number of councils building in supply chain contractual requirements for 30 day payment (from 28 per cent to 40 per cent).

A further 25 per cent said they planned to insert contractual requirements, though the provision has been in place for 18 months. However, there was a year-on-year increase in the number of councils stating they would never build in contractual requirements for prompt payment (from 21 per cent to 28 per cent).

This is in direct contravention to the law. Statutory guidance about the Public Contracts Regulations 2015 states that “any subcontract awarded” by a local authority “contains suitable provisions to impose” the payment of invoices within 30 days.