Scotland business

Late-paying big firms 'should get public contract bans'

Small business Image copyright Getty Images
Image caption The FSB says 36% of small businesses in Scotland have suffered cashflow issues because of late payments

Big companies who pay their suppliers "unacceptably late" should be banned from getting public contracts, small business leaders have claimed.

The Federation of Small Businesses wants firms to prove in advance that they are "responsible" payers.

It has called on the Scottish government to withhold devolved contracts in a bid to tackle the country's "lamentable payment culture".

The Scottish government has said it "strongly" encourages prompt payment.

The FSB claims late payments have led to cashflow issues at 36% of its firms.

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."

'Corrosive practice'

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."

The FSB says a survey which it carried out suggests that 36% of small businesses in Scotland have had financial difficulties as a result of late payments.

The average value of each late payment owed to a Scottish firm is, according to the business organisation, £5,718.

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."