FSB Pressures UK To Nix Contracts To Late Payers

Small businesses combatting the practice of late invoice payments in the U.K. are proposing a new tactic in the fight.

Reports in the BBC on Monday (Feb. 18) said the Federation of Small Businesses wants the government to blacklist late payers from receiving government contracts, calling on Scotland to no longer award contracts to companies that pay their small suppliers “unacceptably late.”

“Our lamentable payment culture isn’t a new phenomenon, but that doesn’t make it any more acceptable,” said FSP Scotland policy chairman Andrew McRae in a statement. “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.”

McRae added that the government has “tolerated” the practice of late payments to small suppliers.

“At the FSB, our patience has grown thin and we want to see decision-makers pull every lever available to eradicate this corrosive practice.”

The FSB’s own research has found more than one-third of small businesses in Scotland have reported cash flow issues as a result of late payments, with an average of $7,391 owed to each small business in late invoice payments.

In another statement, a spokesperson for the Scottish government said the country “strongly encourage[s] all businesses and organizations to ensure the prompt payment of suppliers, and expect[s] those who deliver public contracts to adopt the highest standard of ethical business practices.

“Our work to foster and support fair business practices, such as prompt payment, includes the promotion of the Scottish Business Pledge,” the spokesperson added, noting more than 590 Scottish businesses have committed to the Pledge.

Last year analysis from KPMG found only 17 companies in Scotland out of nearly 900 were complying with new requirements to report on their supplier payment practices.

The FSB has raised the issue of government contracts awarded to late payers in the past. In October the group called for late payers to be stripped of government contracts after Carillion, one of the largest government contractors in the U.K., fell into insolvency, with reports subsequently revealing the company’s practice of late supplier payments.