The UK Government is turning a blind eye to the struggles of small Scottish firms, said Alyn Smith MEP, as a survey published today by the UK Federation of Small Businesses (FSB) highlighted major problems in the UK supply chain.
Of the 2,500 members contacted almost one in five (17%) said they had faced supply chain bullying in one form or another in the past two years. They also noted that payments can arrive up to 120 days after goods had been delivered.
The EU has been leading the way in providing much-needed help to small Scottish firms. The European Council released a directive stating that payments should only be allowed for periods of over 60 days if they are not “grossly unfair to the creditor”, and was adopted by an overwhelming majority of MEPs to emphasise the need for urgent action across Europe.
“The UK has a problem here. Hundreds of small Scottish businesses are acting as creditors to some of the largest UK corporations, which is just wrong. The UK Government has acknowledged the EU directive and adopted the wording but done little to enforce the actual spirit of the law. So long as elongated payment plans are presented to suppliers who have little choice but to accept them, the situation will continue to get worse.
“The size of major firms can enable them, through the threat of de-listing a small supplier from future business, to retrospectively change the terms of the contract. The FSB report notes that this can be done to avoid breaking a contract that they do not wish to (or cannot) pay.
“Such behaviour is clearly troubling and is not only damaging to small business but could enable the manipulation the financial reports of large firms. The recent Serious Fraud Office Investigation of Tesco shows that this is not merely idle speculation.
“Perhaps even more worrying are reports that suppliers are undertaking retrospective discounting by using their position to put pressure on firms to apply reductions to their outstanding debts. I have written to the Department of Business Innovation and Skills requesting that they formally investigate supply chain practice with the aim of creating new legislation to protect small firms from bullying. The current situation is clearly an unacceptable situation that must be resolved quickly before long-term damage is done.
“Large firms provide jobs for thousands of people and clearly perform an important role in the Scottish economy. However, they are not the only part of the market and the needs of small firms should not be simply ignored by those in Government. The EU has done what it can but the UK government must fulfil its obligations.”
The FSB report can be found here.