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Businesses have been warned by the government that they must pay their suppliers on time or face being prevented from winning further government contracts.

Officials from the Cabinet Office have written to the businesses – which include all the government’s current strategic suppliers – to remind them of the new rules on prompt payment, which come into force this autumn.

Minister for Implementation, Oliver Dowden, said: “Prompt payment is critical for all companies helping to deliver public services, particularly small businesses which are the backbone of our economy. That’s why, from September, if government contractors are late with supplier payments, they could be prevented from winning public contracts until they clean up their act.”

Under the new rules, suppliers who bid for government contracts above £5m per annum, who cannot show they are paying 95% of invoices within 60 days, risk being prevented from securing government contracts.

The new measures follow further moves to level the playing field for small businesses, including an ambition to pay 90% of the government’s undisputed invoices from SMEs within five days, and requiring strategic suppliers to advertise supply-chain opportunities worth more than £5m on the government’s Contracts Finder website.

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