The Federation of Small Businesses (FSB) has issued a warning to big businesses that more must be done to bring an end to late payment practice, along with the continued supply chain bullying, currently damaging the UK economy.
Small businesses are worst affected
Research conducted by the FSB has painted a troubling picture with regards to the impact that these poor practices are having on small businesses within supply chains. Their findings show:
- 84% of small businesses reporting late payments.
- 33% state at least 1 in 4 payments owed arrive later than agreed.
- 37% agree that payment terms have increased in the last 2 years, impeding cash flow.
- Just 4% of small businesses said that payment terms were actually improving.
Many small businesses are being forced into using overdrafts and personal credit cards just to stay operational. The FSB estimates around 50,000 small businesses close down every year, as a result of late payment practices, costing the economy £2.5 billion annually.
A call to take immediate action
The National Chairman of the FSB, Mike Cherry, has sent a letter to all FTSE 100 companies, prompting Chairmen and CEOs to take immediate action on stopping poor payment practice for good. He’s calling on these companies to work alongside small businesses to create a better and more effective payments culture in the UK.
As far as the FSB is concerned, there needs to be a fundamental cultural shift in the boardrooms of big business, in order to end the late payment crisis. Larger companies need to show that they’re prepared to address the ongoing issues and hold themselves accountable for late payments.
Consequences of Carillion
This increased pressure from small businesses has come after a published Parliamentary joint Select Committee report on the collapse of Carillion. When the British multinational company crumbled, further poor payment practices were revealed. The report itself showed substantial failures at the company, which included the squeezing of its suppliers, and the frailty of the Prompt Payment Code.
The FSB has called attention to the fact that this wasn’t a one-off and many big businesses are using their power to squeeze small suppliers, and purposefully delay payments in order to improve their own cashflow.
Stamping out late payments
FSB National Chairman Mike Cherry, has called the late payment practices that are currently running throughout the UK’s supply chains a “…national disgrace with the country falling behind almost all other industrialised nations in our ability to pay small businesses on time.”
This mission to strive towards better payment practice to help small businesses is being fully supported by the Secretary of State for Business, Energy and the Industrial Strategy, the Chancellor of the Exchequer and the Prime Minister.
Big businesses are now being pushed to get on-board and take responsibility for good supply chain practice, and lead the way to supporting small businesses and suppliers in stamping out late payments.
If you’ve been affected by late payments and you’re now concerned with how your company will cope, contact Clarke Bell today on 0161 907 4044 or [email protected].
Whatever your situation, our specialist Insolvency Practitioners can give you tailored, free advice on the best way to deal with it.