FSB assembles MPs to tackle supply chain bullying

Thursday 22 January 2015

The Federation of Small Businesses (FSB) recently brought together a cross-party group of MPs to deal with the issue of poor payment practices in the UK.

This roundtable was inspired by recent research from FSB, which found that one in five small businesses had faced some kind of poor payment tactics. Some of these were put in place by large companies, such as Premier Foods.

Poor payment practices are an issue that can be problematic for workers such as limited companies and sole traders as they may depend on large firms for business, which the latter may take advantage of.

The FSB found that five per cent of respondents to its research had been subjects to "pay to stay" clauses. Premier Foods was one company that did this, asking suppliers to pay a flat fee to have the chance of being considered for contracts in the future.

Other poor practices included excessively long payment terms. While the EU issued a directive that said businesses must pay suppliers within 60 days or face interest payments, the UK implementation of this rule means that people can agree longer terms. As a result, some businesses insist on payment terms of 90 or even 120 days.

There is also the issue of late payment, where some companies routinely pass the deadline for payment that was agreed in a contract or they change the date retrospectively so that they can miss a payment date.

Additionally, some companies put discounts on some contracts for themselves if they pay for something either early or just on time.

The parliamentary roundtable was held in Parliament on January 20th and was co-hosted by the FSB and the All Party Parliamentary Group for Small Business.

MP Debbie Abrahams hosted the event, having led a cross-party parliamentary inquiry on the subject of late payments last year. Joining the table was chair of the Small Business APPG, MP Anne Marie Morris, MP Tessa Munt, parliamentary private secretary to business secretary Vince Cable and the FSB's national policy chairman Mike Cherry.

Commenting on the issue of poor payment practices, Mr Cherry said: "It is simply unacceptable for any company to exploit its market position to enforce unfair and unreasonable payment terms. The money outstanding in late payments is in the billions and has consistently grown larger and larger. 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."

Ms Abrahams said that the issue of late payment is one that board members in big businesses can influence, believing that this level is where the late payment culture is set. She said that late payment is a problem relating to leadership and says that deliberately paying late, finding a way of paying late or making changes to contracts after they have been agreed should be considered more unethical than it currently is.

She added: "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."

By Victoria McDonnell

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