'Culture needs to change'
Interview: Ken Lewandowski
No joy from the late, late show
There must be only so many times you can keep banging your head against a wall before you stop. Not so with Ken Lewandowski.
The bruises may not be visible, but he’s prepared to go on taking the knocks if he can succeed in getting concrete action to solve a problem he’s campaigned over for longer than he dare recall.
He wants to talk about late payment, after seeing a report in Daily Business about an FSB survey revealing that 2,000 businesses a year are going to the wall because too many clients don’t pay on time or, in some cases, at all.
“The FSB has done a great job,” he says, patting a copy of the organisation’s report, “but the truth is that this has been going on for 30 years or more ,and it’s getting worse. There are recommendations and guidance in here, but it’s been said before, time and time again.
“What we need now is proper action and that means effective legislation.”
Lewandowski is a veteran of the business world, a chairman of several companies over the years and still sitting on a few boards. He’s been called in as a company doctor on one or two occasions so he knows the problems firms get themselves into.
“Cash flow is the biggest killer,” he says. “If we could make sure all companies are paid what they are due, on time, it would benefit everyone and help the economy grow.”
He is leading an ad hoc group of dozen or so from business organisations, architects, surveyors and others trying to persuade the Scottish and Westminster governments to properly tackle the problem.
“I’ve been around Europe. I’ve seen what works in Germany and the Swedes are now doing something.”
The Germans, he explains, have a 30-day payment deadline, followed by 15 days when interest is due. If there is no payment the matter is referred to the tax office who can double the offending firm’s VAT.
“It makes them pay. It seems to work,” say Lewandowski, who is suggesting the British adop a similar model.
‘When it comes to deals between private companies it is much more difficult’
Some years ago he chaired a group that looked into the problem in the public sector which led to the creation of Project Bank Accounts, an idea that is now in operation.
It aims to stop the process whereby a main contractor is paid by the government but holds back paying sub-contractors. The money instead goes into the PBA and everyone is paid at the same time.
Lewandowski says it may be the solution, but only for the public sector.
“When it comes to deals between private companies it is much more difficult,” he says. That’s why he thinks something like the German system may be the answer.
He says the problem exists in all sectors, but is particularly bad in construction.
“You can have guidelines and prompt payment codes and calls to name and shame, none of them will achieve anything,” he says, adding that even legislation enabling SMEs to take main contractors to court is not working.
“But what happens in practice is that the main contractors just bully the sub-contractors. They tell them that if they go to court they’ll get no further work from them, or they threaten to drag legal action out over two or three years.”
He accuses many big companies of using small firms as an overdraft facility, hanging on to thousands of pounds, sometimes for several months.
“What you now have are main contractors who employ very few tradesmen, they just manage projects. The work is farmed out to several other firms, but when they come to collect their money they’re told the surveyor on the job has left, or the paperwork has gone missing.”
He says ministers have told him legislation won’t work. “They said the same about smoking bans, and it did work. We need a similar culture change in business.”
He says the First Minister Nicola Sturgeon has been very supportive, from her time as deputy first minister and into her current role.
“The Scottish government has been very good,” he says, but acknowledges that its limited tax powers restrict its ability to act independently. That’s why he wants Holyrood to work with Westminster to find a joint solution.
In the meantime, he tears a strip off some of those getting excited about sharing a gala dinner with Hollywood actor Leonardo DiCaprio in Edinburgh.
“They’ll be celebrating at the Scottish Business Awards, but I know some of those attending who not paying their bills,” he said.
“They are not supporting Scottish businesses, they are putting them out of business.”
Director and chairman of Hibernian Football Club ,1999-2004
Local Chairman, Clydesdale Bank, 2007-2012
Director and Trustee, Stephen Gallacher Foundation, current
Incorporation of Goldsmiths of the City of Edinburgh, current
Chairman, WG Renfrew, Emblation, Jarvie Plant, Active Stirling, Shotscope current
Trustee, Children 1st, current
You must have been delighted to see Hibs finally win the Scottish Cup?
“I was there. It was bloody brilliant.”
But you didn’t rejoice on the pitch?
No, I have enough turf in my garden.