Contract (2)

More than half of small businesses have been stung by unfair terms in their contracts with suppliers, according to a new report.

Research by the Federation of Small Businesses (FSB) suggests that 52% of small firms were being disadvantaged, suggesting 2.8 million businesses have suffered because of unfair contract terms.

FSB said suppliers failing to create clear and flexible contract terms were costing small businesses around £4 billion in the last three years.

Three quarters of those affected had been stung twice or more in the past three years.

Mike Cherry, FSB national chairman, said: “Small firms on the bad end of a deal are losing out to the tune of £1.3 billion each year. We have identified persistent problems with suppliers, across sectors, treating small firms unfairly. This suggests the market is failing to deliver value for money products and services for small business customers.

“Small businesses don’t have the time, expertise or purchasing power to scour the market to find and negotiate the best deals. Small business owners behave in a similar way to consumers, but they don’t have the same guarantees of quality or legal redress in an unfair situation.”

The report highlighted the main issues small businesses have faced with their suppliers, including the failure to make auto-rollover clauses clear up front (24%) and trying businesses into lengthy notice periods (22%).

One fifth of small businesses said their suppliers are charging high early termination fees and concealing details in small print.

However, two in five (40%) of respondents said they felt powerless to do anything about the unfair terms because the supplier was too important to challenge.

FSB said the government and regulators of energy, financial services and telecoms should more routinely and explicitly focus on small business vulnerabilities.

They also called upon trading Standards to take action against suppliers imposing unfair terms.Mike Cherry concluded: “If small firms were better protected when entering a contract with a supplier, they would have more confidence and trust in the market.

“Suppliers would be more accountable and businesses would spend less time and money dealing with the fallout. Tackling unfair contract terms would lead to a more efficient and competitive economy.”