Greg Wright: Chancellor must act to tackle the scourge of late payments

Chancellor Philip Hammond Photo: Victoria Jones/PA Wire
Chancellor Philip Hammond Photo: Victoria Jones/PA Wire
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POWER has an unhappy tendency to lead to corruption.

It’s time to tackle the corrosive late payment culture which is destroying small firms. For decades, small businesses have been ruined by big firms who believe the world owes them a living. But the fight back has started and there’s a real chance the big corporates could be cut down to size.

The Federation of Small Businesses’ (FSB) Fair Pay, Fair Play campaign is calling on Government to finally place big firms who refuse to pay on time in the dock. Research from the FSB found that the vast majority (84 per cent) of small firms reported being paid late. Nine out of ten public sector suppliers also said they have been paid late.

Claire Reading, the FSB’s development manager for South Yorkshire, East Yorkshire and the Humber, has encountered many firms who have been driven to despair by late payments.

She 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 actions.”

The campaign calls on the Government to order firms to have one non-executive director who is responsible for payment practice and supplier relationships.

Every PLC should be forced to compile an annual report on how well it treats it suppliers.

This report should contain records of how quickly suppliers are being paid and the number of complaints that have been received about late payments.

If the company treats its suppliers badly, it should expect a roasting from shareholders and the media.

The FSB also wants the Government to take steps to strengthen payment enforcement action. All companies that fail to provide data on their payment practices must face a hefty fine.

Big firms would soon decide that it was a smart financial move to treat their suppliers fairly.

The FSB would also like to see the Small Business Commissioner carrying out “mystery shopper” style investigations into the payment practices of large firms.

The FSB also believes that all FTSE 350 firms should be required to be signatories of a strengthened prompt payment code.

Ms Reading added: “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.”

It’s time for the systematic bullying of small firms to end. The FSB has collected shocking examples of unethical behaviour.

The FSB has seen cases of retrospective discounting, in which larger firms force a discount of an already agreed price. There have also been examples of “paying-to-stay”, where smaller companies pay larger firms to remain a supplier, but without the promise of any work. The FSB bravely challenged Carillion, six months before it collapsed, because it found evidence the firm was paying suppliers in 126 days.

Last year, the Chancellor vowed to take action to tackle the scourge of late payments. The time for talking has ended. We need action.

Only the prospect of severe sanctions will change boardroom culture.