MPs to investigate unfair treatment of small businesses by big firms paying late

MPs to investigate unfair treatment of small businesses by big firms paying late
Enterprise Nation
Enterprise NationEnterprise Nation

Posted: Wed 7th Feb 2018

With the collapse of Carillion and its payment practices towards smaller suppliers still making headlines, MPs have announced they will examine whether enough is being done to protect firms from unfair treatment by large companies.

The Business, Energy and Industrial Strategy (BEIS) Committee inquiry will examine whether measures such as the establishment of the Small Business Commissioner will help those small businesses affected by late payments from suppliers.

The failure of Carillion highlighted the problems many small suppliers have to deal with when it comes to payment terms. Subcontractors to the construction group had to wait 120 days to get their money.

Ministers have attempted to tackle the late payment issue for many years and after much lobbying by business groups, former MP Paul Uppal was appointed as the first Small Business Commissioner.

Uppal has no legal powers but entrepreneurs struggling to get paid can complain to him.

BEIS Committee chair Rachel Reeves MP said: "The collapse of Carillion has also thrown light on the treatment of small companies by large firms and the difficulties caused by late payments.

"Deliberate supply chain bullying can be devastating for business owners and contributes to thousands of business deaths each year. We want to hear if the government could be doing more to stop this."

The inquiry will also look into government support for small businesses to boost productivity

"With smaller enterprises making up more than 99% of private businesses and accounting for more than half of turnover and employment, small businesses are the lifeblood of the UK economy," Reeves added.

"But often our small businesses lag behind their overseas competitors in terms of innovation and productivity and we want to explore what more the government could be doing to help boost this and enable them to access support such as management training.

"Small businesses, whether they are aware of it or not, have a vital role in helping to tackle the UK's wider productivity problem.

Alongside the investigation into late payment and productivity, the Treasury Committee has announced a separate inquiry into finance for SMEs.

It will look at the lessons to be learned from RBS' Global Restructuring Group (GRG), which mistreated many small businesses, and more broadly at the state of the market for SME finance.

Treasury Committee chair Nicky Morgan MP, said: "The case of GRG has undermined the trust of small firms in banks, and highlighted the imbalanced and potentially exploitative relationship between banks and SMEs.

Little has changed since GRG to prevent similar mistreatment happening again, nor to guarantee victims access to fair and reasonable redress.

"Entrepreneurs and small business owners are frequently held up as the backbone of the economy, and as part of the solution to the UK’s productivity problem. They deserve to be treated fairly when they borrow from banks, and have access to justice when things go wrong.

"The Committee will consider the regulation of SME lending, including whether banks should be bound by a broader set of duties when dealing with small businesses, and whether the protections afforded to SMEs, and their avenues for dispute settlement and redress, are appropriate."

Enterprise Nation intends to submit evidence to the inquiries. If you'd like to tell us about your experiences which we can include in the submission, please email dan@enterprisenation.com.

The committees are looking for evidence on these questions:

  • Management capability: How adequate is the availability of, and funding for, training courses aimed at SME managers? What more can be done to provide co-ordinated and high-quality support to improve management capability throughout the UK?

  • Fair treatment: How effective are measures in place to protect small businesses against systematic late payment practices of large companies; are the powers of the Small Business Commissioner to police poor payment practices strong enough?

  • Improving productivity: What access do small businesses have to advice on improving efficiency and productivity through adoption of best business practices? What more should the government do in this respect?

  • Scale-Up: For those businesses wanting to scale-up, how effective is the promotion of available government support? Do existing concessions for small businesses serve to discourage growth? What impact has the Scale-Up Task Force had so far?

Enterprise Nation
Enterprise NationEnterprise Nation
Enterprise Nation has helped thousands of people start and grow their businesses. Led by founder, Emma Jones CBE, Enterprise Nation connects you to the resources and expertise to help you succeed.

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