Companies 'should get public contract ban' over late payments

Big businesses found to be guilty of paying their suppliers "unacceptably late" should be banned from bidding for public contracts, the Federation of Small Businesses (FSB) has said.

Tackling the issue of late payments has been a focus for small businesses for a number of years, and FSB Scotland has told the Scottish government that the only way dramatically reduce late payments is for bigger businesses to prove they are responsible.

FSB Scotland said over a third (36%) of its companies have suffered cash flow problems as a direct result of late payments. The average late payment in Scotland amounts to £5,718, it claimed.

Andrew McRae, FSB's Scotland policy chairman, said: "Our lamentable payment culture isn't a new phenomenon, but that doesn't make it any more acceptable.

"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."

He added: "For far too long, government has tolerated big businesses treating their smaller suppliers with disrespect.

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

Mr McRae said: "It is clear that late payment makes it more difficult to run a business in Scotland.

"In addition to seeing action from government, we need to see leaders of big businesses in Scotland take responsibility for how their companies treat their supply chains."

A Scottish government spokesperson said: "We strongly encourage all businesses and organisations to ensure the prompt payment of suppliers, and expect 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.

"Over 590 businesses have already committed to the Pledge, and Ministers have written to all Scottish Government suppliers encouraging those who haven't already to sign up."