Small businesses pushed to ‘breaking point” by supply chain bullying

SMALL businesses are being bullied by the corporate customers and are subject to alarming levels of widespread unfair dealing, the Federation of Small Businesses has claimed.

Almost one in five companies surveyed by the FSB said they have faced some form of supply chain bullying in the past two years, including excessively long payment terms, retrospective discounting and the pay-to-stay practices used by Premier Foods.

“When the public think of their favourite brands, they are unlikely to connect them with the sort of immoral payment practices which are becoming all too common across an increasing number of industries,” said FSB national chairman John Allan.

The lobby group said the government must toughen up Prompt Payment Code, as well as introduce fresh measures to stamp out the most heinous examples of bad practice. It also wants any company looking to supply the public sector to extend the governments standard 30 day prompt payment terms to their own suppliers.

“Small businesses want 60 day payment terms to be set as an absolute maximum for any business signed up to the Prompt Payment Code. If a company will not agree to 60 days they should not be allowed to sign up,” the FSB said.

As part of the research, businesses were asked to give examples of the most common poor payment practices they had to deal with including pay to stay. Among the most resented practices were ‘pay to stay’, excessively long payment terms, exceeding payment agreements, discounts for prompt payment and retrospective discounting.

“Small businesses are fast approaching the breaking point. They are no longer prepared to put up with these sharp practices. Brands that think they can continue to squeeze their suppliers with impunity may get a nasty shock when what they are doing comes to the attention of their consumers,” said Allan.