Small businesses call for ‘fair play’ in fight against poor payment practices

Ahead of the Spring Statement next month, the Federation of Small Businesses (FSB) has announced a ‘Fair Pay, Fair Play ‘ campaign as it  calls on Government to enlist the help of Non-Executive Directors to help strengthen payment enforcement and adopt Project Bank Accounts in public procurement, as three key reforms that will help end the poor payment crisis in the UK.

The FSB says that ‘Everyone deserves to be paid on time’ is the clear message small firms are sending politicians and big business to end late payments and stop supply chain bullying.

FSB research shows 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. Nine out of ten public sector suppliers say that they have been paid late.

FSB National Chairman Mike Cherry said “For far too long some big businesses have been allowed to get away with poor behaviour that has seen them use their dominant position to bully and squeeze our small firms.”

“This behaviour has forced many small businesses to take drastic steps like turning to personal credit cards and overdrafts, just to survive the wait for a payment. Sadly, some don’t survive this wait.”

“Poor payment practices are not limited to the private sector and they stunt job growth and damage economic growth. At the heart of this scandal, however, lies a more important question about fairness and what is morally right.”

“Why do we find ourselves in a situation where some think it is acceptable and fair to not pay our small businesses on time? The truth is that it isn’t fair – everyone deserves to be paid on time.”

“In last year’s Spring Statement, the Chancellor listened to FSB and promised to act on the late payments crisis. As this year’s Spring Statement approaches, small businesses want the Chancellor to follow up these words with the tangible actions. Our reforms are not the silver bullet that will suddenly signal the end of poor payment practices but are certainly important and necessary steps towards this. I am calling on all politicians and big businesses to back these reforms and show that they believe in fair pay and fair play.”

The campaign calls on Government to:

• Assign Non-Executive Directors responsibility to prevent late payment: Large businesses should be required to assign a Non-Executive Director responsibility for payment practice and supplier relationships, by chairing a Supply Chain Committee or include supplier relationships in chairing the Audit Committee, and be required to provide a summary of their activity for the company’s Annual Report.
• Strengthen payment enforcement: Government should fine companies that fail to provide or provide incomplete Duty to Report on payment practices data. The Small Business Commissioner should have the ability to undertake mystery shopper style investigations into the payment practices of large firms including verifying duty to report on payment practice data and investigating supply chain bullying. All FTSE 350 firms should be required to be signatories of a strengthenedPrompt Payment Code.
• Adopt Project Bank Accounts: Project Bank Accounts should be adopted as the truly default choice for major procurement projects, with proper parliamentary oversight to ensure accountability. For any major construction project, a ministerial statement should be made to Parliament if project bank accounts are not used.

IPSE (the Association of Independent Professionals and the Self-Employed) has responded to an FSB survey. IPSE senior policy advisor Jonathan Lima-Matthews commented: “The culture of late payment is the scourge of the UK’s smallest businesses, the self-employed. This is by no means just in Scotland: it is a serious problem across the UK.

“IPSE research has shown freelancers spend an average of 20 days a year chasing late payments, with 43% doing work they were not paid for at some point in their career.

“The situation is almost at crisis levels in the creative industries, where freelancers have been found to lose a staggering £5,400 a year on average.

“At IPSE, we wholeheartedly support the FSB’s calls for the Scottish government to ban late-paying businesses from public contracts. We also call on the Scottish government – like the UK government – to sign up to the Prompt Payment Code.

“More needs to be done right across the UK. First and foremost, small business commissioner Paul Uppal should be given more powers to clamp down on late payment – including fining the worst offenders. And we would urge the office of the small business commissioner to roll out its new ‘traffic light’ system soon to shine a light on bad practice.”