FSB makes government appeal about impact of late payments on SMEs

Major businesses from the FTSE 350 and members of the Federation of Small Businesses (FSB) have joined forces with the government and the Confederation of British Industry (CBI) to address the UK’s deteriorating payment culture.

In a discussion, hosted by minister for business and enterprise Matthew Hancock, the government admitted that it was aware of issues affecting payment culture and supply chains but could not act until there was a consensus on how best to address these problems.

While the FSB has acknowledged the government’s efforts to improve payment culture, it has called for an independent inquiry to get clear actions on what needs to be done to tackle late payments and supply chain bullying. The FSB has been working to draw attention to many of these practices, including flat fees (dubbed “pay to stay”), excessively long repayment terms exceeding payment agreements, discounts for prompt payment and retrospective discounting.

FSB national chairman John Allan reports that that late payment and the UK’s poor payment culture are difficult issues to address, and that the situation is continuing to deteriorate:

“Following today’s encouraging meeting, which brought together a wide range of views and stakeholders, the FSB is calling for a wide-ranging inquiry to address late payment and supply chain bullying in one place.

“It must be independently led and produce clear recommendations in time for the next government to act on early in the next Parliament. We have already fed back to government on this issue in numerous consultations but without any significant progress yet in tackling the underlying causes of our poor payment culture.”

Allan added that the abuse of small firms working and dealing with bigger businesses cannot continue:

“We have seen the UK’s payment culture significantly deteriorate in the past five years. The gradual creep of payment terms from 30 days to well over 100 days in some cases, coupled with debilitating contract terms, can have a disastrous effect on a small firm’s ability to operate.

“For payment culture to improve, we need fresh thinking and bold steps to be taken.”

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Words: Peter Cribley

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