Ministers urged to ban late-paying businesses from getting public contracts

Big businesses who pay their suppliers unacceptably late should be banned from getting public contracts, the Scottish Government has been told.

Firms would have to prove they “are a responsible payer” under proposals put forward by the Federation of Small Businesses (FSB).

The FSB is calling on the Scottish Government to ask potential suppliers for evidence they pay smaller companies on time before they are awarded devolved public contracts.

Andrew McRae, FSB’s Scotland policy chair, 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.

“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 practise.”

An FSB survey suggests that 36% of small businesses in Scotland have had cash-flow difficulties as a result of late payments, with the average value of each late payment owed to a Scottish firm of £5,718.

Mr McRae added: “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.”

The campaign group’s research also found that 84% of smaller businesses in UK supply chains say that they have been paid late, while 33% say at least a quarter of payments they were owed arrive later than agreed.

Fines should also be introduced by the UK Government, the FSB suggested, for companies who do not publish legally-required payment data.