Big business has been put on notice by the Federation of Small Businesses (FSB) and warned that they must do more to end late payments, poor payment practice and supply chain bullying that is damaging the UK economy. A letter from FSB National Chairman, Mike Cherry, to all FTSE 100 companies urges Chairs and CEOs to take immediate action by agreeing to lead the way in stamping out poor payments for good. In the letter FSB National Chairman, Mike Cherry, calls on these companies to work with small businesses to help foster a new payments culture in the UK.

Research from FSB shows the hugely damaging impact these practices have on small firms within supply chains with our data showing that the vast majority (84%) of small firms report being paid late, with a third (33%) saying at least one in four payments they’re owed arrives later than agreed.

A similar proportion (37%) state that agreed payment terms have lengthened in the past two years, hampering cash flow. Only four per cent say payment terms are improving. The pressure from small business comes after the release of Parliamentary joint Select Committee report on the collapse of Carillion published last week. The report laid bare the substantial failures at the company including the squeezing of its suppliers, and the frailty of the Prompt Payment Code.

FSB is calling for a non-executive Director on Boards to be given a specific responsibility for good supply chain practice including making sure the firm is opting to follow best practice and lead the way, not just doing the absolute minimum or the best it can get away with, and so still squeezing suppliers to improve the firm’s cash-flow.

FSB National Chairman Mike Cherry, said: “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. Carillion’s demise shone a light on the worst kind of payments practices but unfortunately, it isn’t a one-off. Some big businesses use inequality of power in business relationships to squeeze small suppliers and delay payments to improve their own cash flow. This is bullying, pure and simple.”

“These practices are putting small businesses at risk forcing many to turn to personal credit cards or overdrafts just to survive. Sadly, we estimate late payments lead to 50,000 small businesses a year closing their doors, costing the economy £2.5 billion annually. 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. The time has now come for big business to get on board with this mission and strive to be champions of good payment practice. My door is open to any business looking to work with small businesses to get this right.”

“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.”