FTSE 100 bosses asked to tackle ‘supply chain bullying’

29 May 2018

Businesses need to do more to end the culture of “supply chain bullying” that many smaller suppliers face, a business group has said.

Mike Cherry, national chairman of the Federation of Small Businesses (FSB), accused many large companies of using their comparative size to squeeze suppliers, delay payments and improve their own cash flows.

“This is supply chain bullying, pure and simple, and it starves suppliers of their own working capital,” he said.

In a letter to all FTSE 100 companies, Cherry said the UK’s business culture was “unique” in how acceptable it has become to pay small suppliers late. “As a country, we are behind almost every other industrialised nation in our ability to pay small businesses on time,” he said.

He added the collapse of Carillion, which was the subject of a recent joint parliamentary committee report, had brought bad corporate practices “sharply into focus” by highlighting how the firm squeezed its suppliers.

Cherry also said the report demonstrated the “frailty of the Prompt Payment Code” (PCC), and said he had written to Carillion in July 2017 when he learned about the company’s payment terms of up to 120 days.

“Sadly, Carillion is not a one-off. Across the UK economy, we are now seeing an increase in examples of poor payment practices from larger businesses,” he said.

“My request to you, as a leader of one of the UK’s largest companies, is that you personally shine a light on your own company’s payment practice.”

He encouraged business leaders to ask if their companies had received complaints from suppliers, if they are signatories to the PPC and whether CEOs had ever met suppliers.

According to statistics collected by FSB, 84% of members have reported being paid late, 37% have run into cash flow difficulties and 30% have been forced to use overdraft facilities. It said 30% of all payments are late, with an average value of £6,142.

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