GOVERNMENT should do more to encourage the prompt payment of trade bills, says a business support group.

The Forum of Private Business said the Government tendering process should take into consideration the length of time contractors take to pay their suppliers.

The not-for-profit group is urging the Government to use the contracts as a tool to fight late payment by refusing contracts to those companies who take an unreasonable amount of time to pay invoices.

New research carried out by the forum in conjunction with credit reference agency Graydon UK suggests that more than half of all small businesses have been affected in some way by the practice in the last year alone – with 16% claiming it has nearly put them out of business.

“While we strongly support the Government’s plans to improve the public sector procurement process for the benefit of smaller private sector businesses, it would be extremely welcome if it were to ensure only those firms which pay their suppliers promptly are awarded these lucrative state contracts,” said forum senior policy advisor Phil McCabe.

“It would send a clear message to big business that late payment is not acceptable and will not be tolerated by government.

“This is an amazing opportunity for it to lead by example and set the standard for the private sector to follow.

“There really is the potential for massive impact here for very little effort and, after all, if government is paying primary contractors within 10 days, why should those same contractors not settle with their suppliers as soon as possible?”

Mr McCable said: “Our latest research on late payment shows clearly the impact late payment has on small business.

“By being a beacon of best practice and only using firms which respect the supply chain by paying their dues promptly, the Government would be demonstrating huge support for small business.”