MPs will probe the growing problem of late payments to small suppliers this week, days after it emerged that Waitrose was taking three times longer than Tesco to pay many of its bills.
Holland & Barrett, the health supplement chain, was also criticised this month for demanding that its suppliers reduce their costs by at least 5 per cent.
Suppliers, which are largely small and medium-sized enterprises (SMEs), have struggled to recover from the financial crisis, when many of their customers pushed down costs and lengthened payment schedules to protect their squeezed profits. The percentage of SMEs waiting more than 30 days for payment soared from 42 per cent to 51 per cent between the second quarters of 2014 and 2015, according to market research group Experian.
Alok Sharma, a leading Conservative MP who is also an aide to the Chancellor of the Duchy of Lancaster, Oliver Letwin, has secured what is known as a Westminster Hall debate on the issue. These debates give MPs time to discuss what they consider to be significant emerging issues.
Mr Sharma is concerned by a Federation of Small Businesses survey that showed more than half its members were paid late when invoicing larger firms. The organisation has also warned that payment terms for some small businesses have been extended to as much as four months, a potentially crippling financial blow.
He told The Independent this was “completely unacceptable”, though noted that the Government’s establishment of a small business commissioner to resolve supply-chain disputes was a major improvement. He also wants poor payers to be named and shamed by suppliers on websites loosely based on those that review holiday destinations.
Mr Sharma added: “Late payments by larger businesses continue to be a major headache for SMEs, affecting negatively both their profitability and growth.
“I welcome Government plans to establish a small business commissioner and the requirement by large companies to publish their payment practices twice a year. But alongside legislation we need to see a culture change in how some big businesses behave towards smaller suppliers and I would be interested to see a register, or a TripAdvisor-type website, established which allows SMEs to highlight poor payment practice or predatory corporate behaviour by large companies. Late payment practices are clearly holding back GDP growth and they need to stop right now.”
It emerged this month that Waitrose is looking into accelerating and simplifying its payments to its smallest suppliers after discovering that processing invoices was taking as long as 45 days. Tesco has also looked to cut its payment times, promising smaller suppliers delivering up to £100,000 of products a year that they would be paid within two weeks.
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