The outsourcing industry needs to reform its payment practices in the wake of the collapse of Carillion or risk crippling the industry’s supply chain, the chief executive of Mitie has warned.

Phil Bentley said Carillion’s liquidation had “raised some fundamental questions” about the sector and the way it operates.

Carillion collapsed in January with debts of £1.5bn and had been criticised for routinely leaving suppliers waiting 120 days for payment.

Mr Bentley said: “In the long run it’s better to pay the supply chain on time - we’re trying to improve that.” Mitie currently pays its suppliers within 65 to 70 days, although it plans to reduce that to 55 days this year.

He also condemned the use of what he called “money swapping”, when companies are paid in a way that allows them to inflate their income at reporting times. “What is fair business here?” he said.

Mitie also plans to reduce its reliance on a forward payment system that allows it to draw cash from a bank that has not yet been paid. Mr Bentley said around £100m of its income is currently brought into the business this way.

Mitie, which runs cleaning, engineering and security services for large companies, has also taken another look at its pension deficit, which is currently running at around £40m, far lower than the estimated £900m that Carillion had on its books when it collapsed, Mr Bentley said.

The former Cable and Wireless boss was brought in to lead Mitie in December 2016 following two profit warnings in two months under previous boss Ruby McGregor Smith. He quickly launched a turnaround plan for the business, called Project Helix, which the company said on Friday was on track, with higher cost savings over its three-year duration than expected.

Operating profit for the year to March 31 will be slightly down on the previous year, Mitie said, although still in line with its expectations. The company will report its full-year results in June.

Revenue for the year will be between 2pc and 2.5pc higher, at around £2.2bn, and net debt is expected to have fallen by £50m.

Shares in the company were down 2.3pc on Friday, at 157.5p.