An investigation by the Forum of Private Business found a public sector initiative to pay invoices within 10 days is not being passed on by main contractors to smaller suppliers.

The Forum highlighted the case of Glasgow-based member EG Heating and Plumbing Ltd, which was recently forced to wait 60 days to be paid by Interserve Defence despite the firm having been paid by the Ministry of Defence within 10 days.

The Forum believes that, by ensuring it is passed along the supply chain, prompt payment could be used as an incentive for more small businesses to sub-contract on government-sponsored projects.

Head of Policy Matt Goodman said: “For many smaller sub-contractors this is the real story behind the commitment to prompt public sector payment.

“What is the point in main contractors being paid within 10 days if firms further along the supply chain have to wait considerably longer for their money?

“Passing on prompt public sector payment throughout the supply chain would not only help more small firms maintain a healthy cash flow, it would encourage more businesses to bid for public contracts.”