The National Federation of Builders (NFB) believes Network Rail’s decision to make sure subcontractors are paid within 28 days will create a “healthy supply chain.”
The owner and operator of England’s railways confirmed the decision earlier in June in order to guarantee its suppliers for Control Period 6 (CP6) – which will run between 2019 to 2024 – pay SMEs within an acceptable timescale for the work they undertake.
Suppliers will be required to pay subcontractors within 28 days – a move that will overhaul the way larger businesses work with smaller subcontractors, and will minimise the risk of cashflow problems emitting from late payments.
Business representatives of SMEs have long since called for an end to the practice of late payments which have been a blight on SMEs for many years and was put into sharp focus by the collapse of Carillion, which left many firms without the income for work already completed.
The NFB is an association that represents the interests of SMEs in England and Wales; it has been a long-time advocate for fair payment practices and has argued for central and local governments to impose these.
Not only is the practice of late payment detrimental to the stability and success of an SME, it can also lead to stress, anxiety and other mental health issues; a recent survey has revealed 48% of SMEs had suffered from these conditions as a result of late payment experiences.
It is why Network Rail’s stance for CP6 is such a shot in the arm for contractors in the small business community.
It has been welcomed by Richard Beresford, Chief Executive of the NFB.
However, Richard wants to see other organisations act in the same way and enforce similar payment changes.
He said: “Certainty of payment creates a truly healthy supply chain. Network Rail has answered the question on how quickly can a major supplier change is payment policy.
“The only question that remains is ‘who will be the next major contractor to act on fair payment?'”