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18 February 2019

FSB launch #FairPayFairPlay campaign

Poor payments are a problem that so many of our small businesses can relate to. In fact, 84% of them tell us that they have been paid late. As a country, we are behind almost every other industrialised nation in our ability to pay small businesses on time.

This problem isn’t a new one and despite some positive action from Government, far too many of our small firms are still subjected to late payments and bullying from some big businesses who take advantage of their dominant position.

These big businesses use tactics such as extending payment terms, retrospective discounting and even going as far as asking for a discount if they pay on time.

Poor behaviour like this has forced many small businesses to take drastic steps including having to use personal credit cards and overdrafts, just to survive the wait for a payment. Sadly, some don’t survive this wait.

In the interest of fairness, poor payment practices are not limited to the private sector - nine out of ten public sector suppliers say that they have been paid late. This is unfair and unacceptable – Government need to be leading by example on this issue.

We now find ourselves in a situation where some think it is acceptable and fair to not pay our small businesses on time.

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So what is the solution to the problem? In our new campaign, Fair Pay Fair Play, we present three reforms that we feel sets a clear path towards ending the poor payments culture.

Firstly, we think this starts at the top, in the boardrooms of big business. There should be whole-board ownership and visibility of firm’s payment practices. This can happen with the help of a Non-Executive Director who would have responsibility for payment practice and supplier relationships and be required to provide a summary of their activity for the company’s Annual Report. 

Secondly, we need to see stronger payment enforcement for those businesses that behave poorly when it comes to payment practices. This includes making the Prompt Payment Code mandatory for all FTSE 350 companies and fines for companies that do not adhere to the Duty to Report requirements. The Small Business Commissioner should also be given the ability to undertake mystery shopper style investigations into the payment practices of large firms including verifying duty to report on payment practice data and investigating supply chain bullying. 

Finally, we believe that Project Bank Accounts should be adopted as the truly default choice for major procurement projects, with proper parliamentary oversight to ensure accountability. This would ensure that small public sector suppliers are being paid promptly on completion of their work.

These 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.

Mike Cherry, National Chairman, Federation of Small Businesses (FSB)