The Federation of Small Businesses (FSB) has uncovered further “alarming” evidence of supply chain bullying just days after Premier Foods agreed to rethink its controversial “pay-to-stay” programme.

Premier’s Invest for Growth programme asked suppliers to make what Premier described as an investment payment to help fund the company’s growth strategy and it said critics had “widely misunderstood and misinterpreted” the mechanism.

Now the FSB, after surveying 2,500 members, has reported that 17% had faced supply chain bullying in one form or another in the past two years.

The small business group called for fresh measures to stamp out what it says are the most heinous examples of bad practice such as retrospective discounting and pay to stay.

The FSB said the following mechanisms were the among some of the most resented payment practices members had reported:

  • Flat fees – pay to stay – also known as supplier assessment charges or supplier investment payments.  These are flat charges  companies levy on suppliers either as a requirement to be on a supplier list, or packaged as an investment into hypothetical future business opportunities. It is often indicated that non-payment will result in de-listing.
  • Discounts for prompt payment – prompt payment discounts are arbitrary discounts big firms give themselves for paying early or even just on time. For example, a firm that has agreed to pay 120 days following receipt of an invoice might also apply an automatic discount of 3% if they pay on or before the 120th day.
  • Retrospective discounting – some firms seek to apply retrospective discounts to outstanding money owed to a suppler. This involves the company effectively changing the terms of the contract signed with the supplier after a contract has been agreed.

“When the public think of their favourite brands, they are unlikely to connect them with the sort of immoral payment practices which are becoming all too common across an increasing number of industries,” said FSB national chairman John Allan.

“The sense I get from talking to our members is that small businesses are fast approaching the breaking point. They are no longer prepared to put up with these sharp practices.”

The Department for Business, Innovation and Skills called these practices “unacceptable”.

“Many small suppliers feel they are being exploited and we are acting to see that this changes. Large companies need to behave responsibly and should not be using their financial clout to mess their suppliers around,” said a spokeswoman.

“We’re changing the law to make sure that smaller businesses can see which big companies treat their suppliers fairly. Together with small business, we’re giving the Prompt Payment Code teeth and we have also asked the Competition and Markets Authority to investigate ‘pay-to-stay’ clauses.”

 

This story was updated on 11 December to include the response from BIS

Topics