FSB tackles supply chain 'bullies' in Parliament

Powerful partners still exploit market position with late payments culture

A Parliament roundtable this morning discussed how to stop some companies enforcing "unfair and unreasonable" payment terms on the rest of the supply chain.

Mike Cherry, national policy chairman at the FSB, said the money outstanding in late payments – caused by what amounted to a kind of supply chain bullying – is now in the billions of pounds.

"It 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," he said.

"It is simply unacceptable for any company to exploit its market position to enforce unfair and unreasonable payment terms."

The FSB believes that 20 per cent of smaller businesses may have been subjected to some type of payment-delaying tactic. In its survey of 2,539 members, five per cent of suppliers said they were forced to pay a fee, for example, by Premier Foods in order to be considered for any future deals.

Debbie Abrahams, Labour MP for Oldham East and Saddleworth, chaired the inquiry, co-hosting with the Federation of Small Businesses (FSB) and the All-Party Parliamentary Group for Small Business.

"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," Abrahams said.

"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."

Abrahams said politicians must work to change business culture and make it unacceptable to pay contractors late. One way to do this might be to shift the burden of taking legal action from the victimised smaller businesses.

"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 effect of stifling growth," she explained.

Cherry and Abrahams were joined by the chairwoman of the Small Business All-Party Parliamentary Group, Newton Abbot Conservative member Anne Marie Morris; and the private secretary to business secretary Vince Cable, Tessa Munt, the LibDem MP for Wells.

Morris said the voluntary Prompt Payment Code scheme has 1,700 firms signed up, but more must be done. "The Small Business Bill currently going through Parliament will name and shame larger companies that will not commit to this," she added.

It must also be "as easy as possible" to set up and run a business, which makes the issue of prompt payment even more important.

The FSB's Cherry noted that every month there is another "leading company or brand" found mistreating suppliers – often small or micro businesses.

"No one should expect to wait four months to get paid," he said. "Too many large companies and their respected household brands are abusing their suppliers. The attitude of these businesses towards their suppliers has to change."