Call for new government action
Demand for late payment action to save 2,000 firms
Carillion claimed it ‘considerate’ but was taking four months to pay its suppliers (pic: Terry Murden)
Ministers in Edinburgh and London are being urged to deliver a new drive to stop big businesses paying their smaller suppliers unacceptably late.
Research from the Federation of Small Businesses (FSB) suggests that more than 2,000 Scottish businesses a year could be saved from closure if the payment culture was improved.
It also notes that failed construction firm Carillion was among the culprits, taking 126 days – or more than 4 months – to pay its suppliers.
Ahead of the Chancellor’s Spring Statement next month, FSB’s new Fair Pay, Fair Play campaign calls on the UK Government to force the biggest companies to appoint non-executive directors for payment practice and supplier relationships. Further, FSB is urging UK ministers to introduce fines for companies who do not publish legally required payment data.
North of the border, the small business campaign group is urging the Scottish Government to bar the worst late payers from devolved public contracts. They are urging Scottish public bodies to ask large potential suppliers of evidence they’re a responsible payer before awarding taxpayer funded contracts.
Andrew McRae, FSB’s Scotland policy chair, said: “Our lamentable payment culture isn’t a new phenomenon, but that doesn’t make it any more acceptable. As we face the possibility of a sustained period of economic turbulence, we can’t see bigger businesses use their smaller customers as a free source of credit.
“For far too long, government has tolerated big businesses treating their smaller suppliers with disrespect. At the FSB, our patience has grown thin and we want to see decision-makers pull every lever available to eradicate this corrosive practise.”
FSB research shows that thousands of Scottish businesses shut their doors every year due to supply chain bullying and late payment practises. These closures could be prevented if Scotland adopted a similar payment culture to other European nations.
Four in five (84%) UK smaller businesses in supply chains say that they’ve been paid late, according to FSB research, while a third (33%) say at least a quarter of payments they’re owed arrive later than agreed. FSB survey work also suggests that about one in three (36%) Scottish businesses have run into cash flow difficulties as a result of late payments.
UK small businesses say that 60% of late payments are greater than £1,000 in value while the average value of each late payment owed to a Scottish firm is £5,718.
Almost a third of small businesses (30%) have been forced to use an overdraft and 20% cite a slowdown in profit growth. The FSB says that if all payments were made on time 50,000 more businesses could stay open each year, while the UK economy would receive a £2.5 billion boost.
Andrew McRae said: “It is clear that late payment makes it more difficult to run a business in Scotland. In addition to seeing action from government, we need to see leaders of big businesses in Scotland take responsibility for how their companies treat their supply chains.”