The government has announced a new SME Action Plan₁ to enable small and medium-sized enterprises (SMEs) to gain easier access to government contracts as part of a £35m promise to unlock more opportunities for smaller companies.
The SME Action Plan sets out a commitment by the Department for Business, Energy and Industrial Strategy (BEIS) that by 2022, at least £1 in every £3 government spends will be with smaller businesses and the BEIS Group will spend an extra £35m with SMEs to level the playing field for SMEs bidding for government procurement contracts. BEIS and its partner agencies currently spend approximately £360m a year with SMEs. In addition, to help smaller businesses find subcontracting work, the department will also ensure government’s larger suppliers advertise on the government’s Contracts Finder site.
Announcing the initiative, Small Business Minister Kelly Tollhurst said “The UK’s 5.7m SMEs are the lifeblood of our economy, employing 16m people and accounting for £1.9tn of turnover. They work hard, day in and day out, creating jobs, opportunities and greater choice for consumers and helping to keep the UK a great place to start and grow a business. That is why this government’s modern Industrial Strategy is fully behind them and we are working, through initiatives like the SME Action Plan, to build a Britain in which they can continue to thrive.”
The government is also keen to help SMEs with their cash flow by announcing a strengthening of its own commitment to prompt payment with a goal to pay 90% of undisputed invoices from SMEs within 5 days. This is significantly better than the Prompt Payment Code introduced in 2015 which committed businesses signed up to the code to voluntarily agree to pay 95% of outstanding invoices within 60 days of them being submitted.
An estimate from BACS puts the amount owed to UK SMEs collectively at over £26bn in overdue payments. Many companies still routinely pay their suppliers and subcontractors in 90 days.
According to the Small Business Commissioner, Paul Uppal “Government has sent a clear signal that business needs to follow suit, and if they don’t, they are not willing to do business with them in the future and will be excluded from major government procurements if they cannot demonstrate a fair, effective and responsible approach to payment in their supply chain management. To tackle late payments, we need to collaboratively work together and adopt a consistent fair and ethical approach.”
Nearly a quarter of UK businesses report that late payments are a threat to their survival. Tackling them represents a huge opportunity for economic growth, with research from the Federation of Small Businesses suggesting it could add £2.5bn to the UK economy and keep an extra 50,000 businesses open each year.₂
Many resellers are SMEs themselves and so the new SME Action Plan and the commitment to improve payment terms are encouraging inititaives.