[Mr Jim Hood in the Chair] — Late Payments (SMEs)

Part of the debate – in Westminster Hall at 10:21 am on 14th September 2011.

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Photo of Simon Hart Simon Hart Conservative, Carmarthen West and South Pembrokeshire 10:21 am, 14th September 2011

I shall be brief, given the time.

I want to deal with the so far unexplored issue of late payments due to legal disputes and to touch on one example from west Wales, which highlights that point. RWE npower is constructing a £1.6 billion power station, using Alstom as its main contractor, which in turn is using SOMi Impiante, a company based in Italy. That company is using a range of local subcontractors. Because of a legal dispute—I will not go into the rights and wrongs of it; the legal process will unfold—a wide range of subcontractors to SOMi Impiante, which has now gone back to Italy, have found that the money due to them for work done in good faith in accordance with their contract has not been paid. It is uncertain when it will be paid. They face the prospect of a considerable wait for the legal process to unfold.

Those companies are important to our local economy. They tendered competitively for the work, and their margins are extremely tight at the best of times. They have a sensitive and vulnerable cash flow, and their local reputation is important to them. Yet they are the victims of delays that are way outside their control and beyond the terms of the contracts that they signed. The delays are also outside the terms of the prompt payment code, but those companies do not have the money to engage in expensive and long-running legal battles against major companies based in foreign countries. Even if they had a reasonable chance of success, the sensitive cash flow that I have mentioned is hardly on their side. Of course, typically at such moments, the banks are facing in the opposite direction just when they are needed.

If the Minister were in my shoes, advising companies in my area that are victims of late payment as a result of others’ legal disputes, what advice would he give me?