Big companies behaving badly

Small businesses are struggling to cope with an increase in poor payment practices, a survey carried out by the Forum of Private Business (FPB) has revealed

A third are owed between £1,001 and £5,000 and half state that late payment has become worse over the past year. Nearly all of the FPB’s members surveyed called on the government to set an example by paying its suppliers on time.

The FPB is working with the government to find non-legislative solutions to payment problems. Small firms already have a statutory right to interest (SRI) under the Late Payment of Commercial Debts (Interest) Act 1998. This allows them to charge interest on the debt they are owed, but relatively few take advantage of it.

Many large companies impose unilateral changes to contractual terms, with little or no warning. Last week, the FPB added Matalan to its Hall of Shame, which already contains 23 further companies that have squeezed their suppliers. The retail giant has declared that, from 1 September 2008, it is to pay suppliers 2 per cent less on each invoice in order to fund advertising and marketing campaigns, and other developments.

“A change to contractual terms cannot be made unilaterally. This is a simple matter of contract law,” said the FPB’s late payment adviser, Stuart Blake. “Suppliers receiving underpayment on deliveries made under contracts agreed before the date of this letter will automatically be entitled to interest under the terms of their original contracts or under the LPCD(I) Act. What is more, if their entitlement stems from the LPCD(I) Act, they will be entitled to a late payment penalty charge as well, assuming their contract post-dates August 2002.”

Blake added a note of caution: “Suppliers should be careful about fulfilling orders received after this letter was sent, since to do so may indicate acquiescence, and therefore acceptance, of the new terms the letter seeks to impose.”

The majority of the FPB’s members surveyed (72 per cent) said that the standard payment period set out in their contracts is 30 days.

The FPB is protesting against payment abuse as part of its ‘Think Smallest First’ campaign. For more information about the other companies ‘named and shamed’ by the FPB, visit www.fpb.org/hallofshame

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