The Federation of Small Businesses (FSB) has called on the UK’s leading companies to address the issue of late payments.
FSB Chairman Mike Cherry sent a letter to the leaders of the FTSE 100 companies urging them to lead the way in eliminating late payments that can cause huge cash flow problems for smaller firms.
Mr 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 cashflow. 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.”
Research from the FSB found that 84% of small firms report being paid late, with a third 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 4% say payment terms are improving.
Mr Cherry added: “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.”
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