Late Payment Crisis ‘is a National Disgrace and Hurts the Economy’

The prevalence of late payments and supply chain bullying tactics have been labelled a “national disgrace” and a major hindrance to the competitiveness of the UK economy by the chairman of the Federation of Small Businesses (FSB).

Mike Cherry and his organisation are calling on big companies around the country to take much more decisive action to clamp down on poor payment practices that can do so much to damage the prospects of smaller scale businesses within their supply chains.

“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,” Mr Cherry has said.

“These practices are putting small businesses at risk forcing many to turn to personal credit cards or overdrafts just to survive.”

The FSB estimates that the issue of late payments is responsible for as many as 50,000 small scale enterprises being forced out of business each year across the UK.

The cost to the UK economy of those issues is estimated to be around £2.5 billion on an annual basis and the FSB is calling for FTSE 100 CEOs and their boards of directors to take steps towards tackling the problem.

A very sizeable majority (84 per cent) of the small businesses polled by the FSB recently said that they’ve experienced late payment problems and a third said that at least a quarter of their payments are usually received late.

Another issue for small companies is that they are often obliged to lengthen the payment terms associated with their invoices, which can lead to serious cash flow concerns.

Only 4 per cent of the small business operators quizzed by the FSB said that they feel as if payment terms and arrangements they enter with larger scale clients are improving.

Recent parliamentary enquires into goings on within the now collapsed construction and facilities management firm Carillion showed that the company was routinely squeezing its suppliers and often failing to pay them within previously agreed timeframes.

“Carillion’s demise shone a light on the worst kind of payments practices but unfortunately it isn’t a one-off,” said Mr Cherry in a statement.

“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,” he said.