TfL says funding prevents it paying suppliers faster

19 June 2020

Transport for London (TfL) has said it is committed to paying suppliers promptly during the Covid-19 pandemic but funding restrictions limit the support it can give to the supply chain.

In a meeting of the London Assembly Transport Committee, TfL chief financial officer Simon Kilonback said TfL paid all SME suppliers within 10 days and all suppliers within 30 days.

However, he said TfL had not been able to deliver the full support to suppliers it would have wanted in terms of faster payments because of funding constraints.

Last month the government agreed a £1.6bn funding and financing bailout for TfL to protect key services suffering from plummeting passenger numbers.

In response to a question from the committee’s deputy chair Caroline Pidgeon about support for suppliers, Kilonback said TfL had made a case with the government for being treated like Network Rail and Highways England, who have sped up payments to suppliers.

However, Kilonback said the government’s bailout deal meant that TfL was not fully funded through the coronavirus crisis in the same way as those organisations.

He said: “Unfortunately, we spent a period of time negotiating the funding, and at the end of that we were not fully funded in the same way, and therefore this has had an impact on what we can do and what we can’t do.”

Kilonback said TfL would try to make the case again for adequate funding in the second half of the year, but added that TfL did commit to prompt payment.

“So we very much comply with that but it’s the other measures around support for the supply chain which we haven’t been able to fully deliver as we would have wished because of the way our funding settlement was concluded.”

Last month, HS2 said it was accelerating payments to all companies in its supply chain because of concerns about the impact of the Covid-19 pandemic on cash flow in the construction industry.

Approved payments are to be processed immediately when funds are available rather than within the contracted payments terms. Tier one contractors in the HS2 supply chain have the duty to ensure the approach is followed through all tiers of the supply chain.  

HS2 said the measures should go some way to providing reassurance to firms working on the project and help ensure stability within the supply chain.

An estimated 400,000 supply chain contract opportunities for UK businesses will be created during phase one of HS2. It is estimated that around 95% of those contract opportunities will be won by UK-based businesses and around two-thirds of those will be SMEs.

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