Plans by the Labour leader, Jeremy Corbyn, to tackle poor payment practices by big companies against their small suppliers have been welcomed by the Federation of Small Businesses (FSB).
In a speech to FSB members today, Mr Corbyn’s proposals included excluding late-paying large firms from public contracts, and to force big businesses being paid by taxpayers to pass on prompt payment requirements down the supply chain.
The Government this month introduced a requirement for large companies to declare what percentage of their payments to smaller suppliers are settled within an acceptable 30 days; and what proportion go unpaid for an unacceptable 60 days or more.
FSB National Chairman, Mike Cherry, said:
“Small firms are facing a late payments crisis. We know from our research that around 50,000 small firms a year go bust as a result of unfair and lengthy delays in big business customers paying what they owe. Others often have to take out loans to cover the gap. These poor practices and wider supply-chain bullying have to stop.
“Jeremy Corbyn’s proposals today are important, as we build a cross-party consensus for further action. Government’s transparency reforms are vital, but not sufficient. We believe it must set an example, with prompt payment practice disseminated throughout the supply chain of the £230bn public procurement programme.
“Larger firms should be helping their smaller counterparts, not paying them late. To eradicate this will require culture change across the economy which must be championed from the very top. That is why we believe the best solution is to make a Non-Executive Director on the Board of all large businesses accountable for the firm’s treatment of its smaller suppliers.
Mike Cherry also welcomed Jeremy Corbyn’s pledge to exempt smaller firms from Government plans to replace annual tax returns with quarterly ones:
“FSB research shows the potential burden these reforms will have on those least able to deal with it, with time and support costing more than £2,000 for an average small business. We agree there is a strong case to exempt firms below the VAT threshold of £83,000, as those above are already making quarterly returns and so are better able to cope. The Government’s one-year delay for these businesses should be made permanent.”
On Labour’s plan for a £10 an hour Living Wage by 2020, Mike Cherry said:“FSB supported the introduction of the Minimum Wage. Most of our members already paid all their staff in excess of the latest rise to the National Living Wage, however some firms are now struggling as the rate ratchets up, especially in sectors with tight margins such as elderly care, childcare, and hospitality. When adding in other recent cost pressures on small firms, the cost of doing business is at its highest level for three years.
“Offsetting the financial impact of a higher Living Wage with a reformed and uprated Employment Allowance for small firms would help mitigate what many small businesses would see right now as an unaffordable rise. Just as we face Brexit, the last thing we need is for small firms to close, reduce headcount, or hinder job creation.”