Around one in five small businesses in the UK is affected by supply chain bullying, according to new research by the Federation of Small Businesses (FSB).

Following the recent Premier Foods ‘pay to stay’ scandal, the FSB has found further evidence of smaller businesses experiencing unethical payment practices from firms they supply to. Out of 2,500 FSB members surveyed, 17% said they had faced supply chain bullying of some kind over the past two years.

Types of unethical payment practices range from companies charging flat fees for small businesses to remain on the supplier list (pay to stay) through to late payments and excessively long payment terms (pay you later).

John Allan, National Chairman of the Federation of Small Businesses, said: “The sense I get from talking to our members is that small businesses are fast approaching the breaking point. They are no longer prepared to put up with these sharp practices.

“Brands that think they can continue to squeeze their suppliers with impunity may get a nasty shock when what they are doing comes to the attention of their consumers.”

More action on unethical payment practices needed

In light of these findings, the FSB is calling on the Government to act. Besides introducing new measures, they want a tougher stance to be taken with the Prompt Payment Code so that companies refusing to agree to the standard 30 days or maximum 60 days payment terms will not be allowed to sign up.

The Government recently announced plans to tackle late payments by introducing proposals obliging larger companies to provide detailed information about their payment practices, including average paying time.

Under the Small Business, Enterprise and Employment Bill that is currently going through Parliament, reporting these details on a quarterly basis will become a mandatory requirement.