The Federation of Small Businesses (FSB) has called on big business to put an end to poor payment practice with the UK’s SMEs.
More than four-fifths (84%) of small businesses have reported being paid late by bigger firms. The FSB’s national chairman, Mike Cherry has sought to challenge the apparent culture of supply chain bullying by writing to the chairs and CEOs of all FTSE 100 companies.
In his letter, Mr Cherry urges the UK’s leading corporations to end the damage being done to the national economy by developing a new payments culture with small businesses.
“The poor payment practices that run rampant through UK supply chains is a national disgrace with the country falling behind almost all other industrialised nations in our ability to pay small businesses on time,” said Cherry.
Recent figures from the FSB suggest a third of small businesses receive at least a quarter of their payments owed beyond the agreed date.
A similar figure (37%) have confirmed that payment terms with larger firms have extended during the last 24 months, further squeezing cash flow.
In rather damning fashion, only 4% of small business owners surveyed believed payment practice was improving.
The recent Parliamentary joint Select Committee report on the collapse of Carillion outlined significant issues with the company squeezing its suppliers and reinforced the fragility of the current Prompt Payment Code.
Cherry believes late payments from bigger businesses causes “50,000 small businesses a year” to close. He estimates that this costs the economy “£2.5 billion annually”.
The FSB believes a non-executive Director on Boards should be put in charge of ensuring a responsible supply chain, maintaining best payment practice to SMEs and not simply doing the bare minimum. In doing so, they will transform the cash flow of small firms that are the heartbeat of the UK economy.
“Small businesses have the support of Secretary of State for Business, Energy and the Industrial Strategy, the Chancellor of the Exchequer and the Prime Minister in their mission to stamp out poor payment practices,” added Cherry.
“We can only end the late payments crisis and poor payment practices when we see a fundamental cultural shift in the boardrooms of big business, with those at the very top showing a willingness to address the issue and be accountable for their payment practices.”