It was “unacceptable” for any company to exploit its market position to enforce unfair and unreasonable payment terms and there needed to be tougher regulation from the next government, the FSB claimed.
“The money outstanding in late payments is in the billions and has consistently grown larger and larger,” said FSB national policy chairman Mike Cherry.
“We need greater leadership from all parties competing to be in the next government to toughen up the prompt payment code and improve the UK’s payment culture."
Victim
Almost one in five small businesses had been the victim of some form of poor payment practices, FSB claimed. Five percent had experienced the ‘pay to stay’ practice used by Premier Foods, which asked suppliers to pay a flat fee in order to be considered for future contracts, it added.
The ‘pay to stay’ scheme was one of five poor payment practices identified by the group, according to FSB research.
The others included waiting an excessively long time for payment – more than the 60 days required in an EU directive.
Late payments, discounts for prompt payments and retrospective discounting were the other examples of poor payment, according to the survey of 2,539 FSB members.
The group – led by Debbie Abrahams MP and comprising Anne Marie Morris MP, chair of the Small Business All Party Parliamentary Group, Tessa Munt MP, parliamentary private secretary to business secretary Rt Hon Vince Cable MP and Cherry – met yesterday (January 20).
Abrahams claimed a late payment culture was set at board level and the burden of legal action should be taken away from the victims.
Debbie Abrahams MP
“Late payment is something that ceos and board members in big businesses can influence and I have always maintained that a late payment culture in a company is set at board level.”
Unethical
“That makes it a leadership issue and it’s time that deliberately paying late, finding ways to pay late, or making unilateral changes to pre-agreed contracts is seen as being as unethical as tax evasion,” she said.
“It’s simply a case of big businesses using smaller businesses as a credit line by applying bullying tactics that are unfair and have the knock-on effect of stifling growth in the economy.”
Morris said 1,700 firms had already signed up to the voluntary prompt payment code, committing to paying their debtors on time.
“Moreover, the small business bill currently going through parliament will name and shame larger companies who will not commit to this practice of ensuring a fairer payment culture,” she said.
“We must continue to do more, however, to ensure small businesses are not endangered because of late payment, even if this means more mandatory measures need to be put in place.”
Munt said politicians and businesses should now work together to create a cultural change that made exploitation of small suppliers a thing of the past.