The next government must improve payment culture

The FSB and some of our members directly affected by late payment met with Government, the Confederation of British Industry and leading FTSE 350 members to discuss the UK’s deteriorating payment culture.

The FSB acknowledged efforts from Government to improve payment culture, but called for an independent inquiry to get clear actions on the progress needed to tackle late payment and supply chain bullying. The discussions focused on the boundary between acceptable commercial negotiation, and the exploitation of suppliers.

It also explored some of the most problematic payment practices. The FSB has been working to raise the profile of many of these practices including flat fees, dubbed ‘pay to stay’, excessively long payment terms exceeding payment agreements, discounts for prompt payment and retrospective discounting.

FSB research revealed that small firms want to see the Prompt Payment Code strengthened, with signatories to both the PPC and the Prime Minister’s Supply Chain Finance initiative paying within 60 days unless specific conditions are met. The research also showed that almost one in five small businesses had been subject to some form of poor payment tactics.

John Allan, FSB national chairman, said: “If we look at late payment, it’s a massive problem for small businesses costing them tens of billions of pounds each year. If you are waiting for a payment from your biggest client, it means you can’t buy in new machinery, hire new staff or in some cases pay your employees.”

The inquiry must be independently led and produce clear recommendations in time for the next Government to act on early in the next Parliament. We have already fed back to Government on this issue in numerous consultations but without any significant progress yet in tackling the underlying causes of our poor payment culture. We need greater leadership from all parties competing to be in the next Government to toughen up the prompt payment code and improve the UK’s payment culture.