Small Firms Hit By 'Unfair' Supply Contracts

More than half of small businesses are being disadvantaged due to unfair terms in their contracts with suppliers, it has been claimed.

Fifty-two per cent of firms surveyed by the Federation of Small Businesses (FSB) said they had been stung by unclear and inflexible contract terms which had cost them an estimated £4bn over the last three years.

A failure of suppliers to make automatic rollover clauses clear upfront was identified as one of the main problems, with 24% of businesses pinpointing the issue.

Lengthy notice periods, high early termination fees and the concealing of details in small print were also highlighted as significant roadblocks for firms.

According to the FSB research published on Monday 2.8 million small businesses have had problems with contract terms, with three-quarters of those reporting they have been affected more than once over the past three years

Mike Cherry, FSB national chairman, said: "Small firms on the bad end of a deal are losing out to the tune of £1.3b each year.

"Small businesses don't have the time, expertise or purchasing power to scour the market to find and negotiate the best deals.

"Small business owners behave in a similar ways to consumers, but they don't have the same guarantees of quality or legal redress in an unfair situation."

Two in five of the businesses surveyed said they felt they were unable to challenge their suppliers over the unfair terms in their contracts as they were too powerful or too important to lose as a business contact.

According to the FSB, this means the situation is unlikely to change until the Government and regulators take action to protect small business owners, and Trading Standards are given powers allowing them to take action against the culprits.

"If small firms were better protected when entering a contract with a supplier, they would have more confidence and trust in the market," said Mr Cherry.

"Suppliers would be more accountable and businesses would spend less time and money dealing with the fallout.

"Tackling unfair contract terms would lead to a more efficient and competitive economy."

Responding to the research, a Department for Business, Energy and Industrial Strategy spokesperson said: "The UK has a record number of small businesses which are a key part of our economy and the Government remains committed to ensuring we help them to grow and flourish.

"The Government is tackling the issues of late payment and will appoint a Small Business Commissioner in 2017 to advise and support small businesses (Other OTC: UBGXF - news) ."