Small firms urge action to tackle late payment crisis

'Government has tolerated big businesses treating their smaller suppliers with disrespect,' says Andrew McRae of the FSB. Picture: Contributed

The Federation of Small Businesses (FSB) said thousands of Scottish businesses shut their doors every year due to late payment issues that it said could be prevented if Scotland adopted a similar payment culture to other European nations.

The FSB is urging the Scottish Government to bar the worst late payers from devolved public contracts and is calling on public bodies to ask large potential suppliers for 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 four in five UK smaller businesses in supply chains say they’ve been paid late, while a third say at least a quarter of payments they’re owed arrive later than agreed.

The FSB survey also suggests that about one in three Scottish businesses has run into cash flow difficulties as a result of late payments. The average value of each late payment owed to a Scottish firm is £5,718.

The FSB’s “Fair Pay, Fair Play” campaign calls for steps including non-executive directors to be assigned responsibility to prevent late payment.

The UK’s Small Business Commissioner should also have the ability to undertake mystery shopper style investigations into the payment practices of large firms and a duty to report on payment practice data and investigating supply chain bullying.

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.”

Meanwhile, a report from HR body Cipd and the Adecco Group said that inflation and skills shortages had pushed private sector pay expectations to a seven-year high. After six years stuck at 2 per cent, basic pay award expectations in the private sector have increased to 2.5 per cent, according to the report.

The report surveyed 1,254 employers on their pay, recruitment and redundancy intentions for the first quarter of 2019. It found that basic pay expectations in the private sector have increased to the highest since 2012.