I was shocked to hear the news this week that Premier Foods are demanding payments from their suppliers using a so-called ‘pay and stay’ scheme. In my view, this is just another example of large companies using bullying tactics against small businesses by demanding money to finance their own existence.
‘Pay and stay’ is when a large company demands a payment from its smaller suppliers, either as a one off or on an annual basis; as is the case with Premier Foods. If the smaller supplier refuses to pay they risk losing their contract with the larger business.
In November I tabled amendments to the Small Business, Enterprise and Employment Bill to tackle unfair payment practises, including one that would ensure there could not be unilateral, ad hoc, changes to payment terms in contracts between large companies and suppliers but they were blocked by the Government.
My Be Fair – Pay on Time campaign is fighting any method used by larger companies to pay late, avoid paying or finding ways to change pre-agreed contracts. This tactic used by Premier Foods falls in to the last category and is blatantly unfair. They are clearly financing their own business by using small companies as a credit line. Premier Foods know they can use their size to threaten smaller businesses with losing their contracts. How ironic that this story should come to light just before Small Business Saturday!
One supplier to Premier Food has described this tactic as blackmail and I agree with him. It’s a disgraceful way to run a business. I have always said that issues around late payment is a leadership issue. It’s the chief executives and board members who set the tone of a company’s payment culture. It’s time that late payment was regarded as being as unethical as tax evasion.
The latest figures put out by the Federation of Small Businesses (FSB) show Britain’s small businesses are now owed a massive £46 billion in overdue payments. The majority of people in employment work for a small or medium sized business. The Tories and Lib Dems had the chance to help small businesses during the passage of the Small Business, Enterprise and Employment Bill, but chose not to support my amendments. What message does this send out to small businesses?