The government and its agencies continue to pay small businesses late, despite making a public commitment a year ago to settle bills within 10 days.

The prompt payment promise was designed to help SMEs facing the recession. But a survey of 10,000 SMEs by the Federation of Small Business (FSB) shows that 31% of central government agencies are still likely to make late payments; government agencies (30%), the NHS (29%) and local authorities (25%) are also defaulters of the 10-day code.

The Department for Business, Innovation and Skill (BIS) say their data presents a different picture. According to the BIS, 19 out of 20 invoices had been paid on time in December last year by central government, adding up to a total of £21bn.

The survey, the most extensive so far, also shows how small enterprise is coping with cash flow problems. Two out of five businesses had dipped into personal savings, while others used overdrafts and credit cards to get by.

The FSB wants the government to add a Social Clause' to national and local government contracts. This clause would guarantee that when the government pays the lead contractors swiftly, this is passed down the supply chain to all sub-contractors.

Do you think a social clause in contracts would speed up payments to small businesses? Drop us a line.