Minister calls for more safeguards for smaller firms after Carillion

Business Secretary Greg Clark on Wednesday admitted that more protection for smaller firms was needed in the wake of Carillion’s collapse, to prevent suppliers being left high and dry by major corporate failures.

Carillion — which went bust in January — regularly kept suppliers waiting up to 120 days to be paid despite signing up to the Government’s prompt payment code, a voluntary scheme whereby members pledge to pay 95% of their invoices within 60 days.

But Clark told a joint select committee of MPs that “it is obvious these payment terms were too long” and added that the code’s effectiveness had been discussed with the business taskforce set up after Carillion’s demise. “I would like to strengthen it,” he added.

MP Rachel Reeves also pressed the minister to “tighten up government procurement” to ensure best payment practices were entrenched. “For a lot of small business which have built roads, hospitals and schools they are never going to get paid on behalf of the taxpayer,” she added.

Esther McVey, the Work and Pensions Secretary, highlighted the strengthened proposed powers for the pensions regulator this week, which could see much tougher penalties or criminal charges for directors who have been reckless with company pensions. Potentially fines could be retrospective, she told MPs.