The Federation of Small Business has written to the leaders of the UK’s 100 biggest companies complaining that many large business are guilty of “supply chain bullying”.
The letter from FSB national chairman Mike Cherry argued that many big companies are using the disparity of power in business relationships to “squeeze suppliers, delaying payments to improve their own cash flow.
“This is supply chain bullying, pure and simple – and it starves suppliers of their own working capital.”
The letter to all FTSE 100 companies follows the publication of a report by MPs, on the failure of Carillion which, the FSB said, highlighted the way it squeezed suppliers and the frailty of the prompt payment code.
The FSB argues that Carillion is not a one-off and more large companies are lengthening payment terms, paying late, or paying less that 100 per cent of the amount due in exchange for a shorter delay.
FSB research found that 84 pert cent of FSB members reported by paid late, while 37 per cent had seen terms deteriorate over the past two years. Some 37 per cent of small businesses had run into cash flow problems, 30 per cent had been force to use an overdraft and 20 per cent said they had seen a slow-down in profits.
Cherry pointed out that the UK lagged behind almost every other industrialised nation in paying small businesses on time.
And he called on the leaders of the FTSE 100 companies to shine a light on their payment practices, asking:
- Does your company create a positive relationship with your small suppliers?
- Has your company received complaints from suppliers, and how do you investigate them?
- As the Chair or CEO, have you met with your suppliers?
- Have you signed the Prompt Payment Code and do you follow the spirit of it?
- Are you reporting on your payment terms, at minimum for the data needed for the Duty to Report on Payment Practices and Performance?
- Have you published a small supplier charter, setting out how you pledge to help small businesses in your supply chain?
- Have you appointed a Non-Executive Director on your board to have responsibility to look after your supply chain?
- Does your company negotiate the terms of your contracts with suppliers individually or do you have standard terms?
- Has your company changed your terms retrospectively i.e. after the initial contract has been agreed?
The FSB wants to see positive Champions emerge among the UK’s leading companies.