New prompt-payment rules introduced by the Government on 1 September will exclude big businesses with poor payment practices from ‘lucrative’ taxpayer-funded contracts.

Reacting to the start of the crackdown, Federation of Small Businesses (FSB) national chairman Mike Cherry said (www.fsb.org.uk): “We welcome the new administration taking ownership of the late-payment crisis with this crucial step, sending a message that late payment will not be tolerated within Government contracts.

“We have worked very hard with the Cabinet Office to get to this moment and prevent another Carillion.

Payment terms were lengthened as the company fell into difficulty, it hoarded taxpayers’ money, and it tried to improve its cash-flow off the back of its small suppliers.

This move sends a message to the wider business community that the Government is taking this seriously, and those found in breach of the Prompt Payment Code will be excluded from bidding for contracts.

“As late-paying Government suppliers are discovered, they must clean up their act by being placed under special measures for the duration of that contract and then ultimately excluded.

“Measures to open up public procurement will give tax-payers and our public services access to the innovation and value that small firms bring, as well as helping our economy.

“This is a challenge, and there is more work to do, but this announcement is an important step.

"We will continue to work with the Government on this and further measures to drive late payment out of the UK economy once and for all.”