Small Business Commissioner to Keep an Eye on Supply Chain Exploitation – Maybe

The government is going to appoint a "Small Business Commissioner" to help resolve disputes between small firms and their larger customers, which in the main are around demands for additional discounts or rebates and delaying of invoice payments. Well Hurrah!! (Again - I seem to be channeling Hugh Laurie as Prince George in Blackadder rather a lot at the moment). But is there any substance to this, or just a nice bit of political window-dressing to keep the small business lobby happy?

Large firms using their naked power to delay their payments to smaller suppliers is, I suspect Andrew Cox would argue, a simple fact of a power imbalance in the supply / value chain. Or it is a disgraceful and unfair tactic that is jeopardising the UK economy, stifling the growth of dynamic small firms etc, etc? You takes yer pick and you makes yer choice.

Seriously, it is a difficult issue. On the one hand, negotiations on payment terms must be a legitimate part of the commercial transaction, as much so as discussing price. Yet something does seem distasteful and maybe even immoral about giant firms threatening the survival of tiny suppliers by unilaterally imposing delayed payments for instance.

But it seems odd that the government has not announced who the commissioner is going to be. Perhaps it is because actually, the Minister concerned, Anna Soubry, announced a consultation about the role, not a real decision - so giving big business the chance to water down its mandate, perhaps?

"We’re asking for views on our proposals to establish a Small Business Commissioner to help small business resolve supply chain disputes with other larger businesses".

But assuming it goes ahead, why not Stephen Allott? As the Crown Commercial Representative for SMEs already, this new role would seem to fit perfectly with his current agenda.

Meanwhile the jury is still out on whether my old colleague Christine Tacon is having an effect as the Grocery Code Adjudicator. Morrison's were in the news recently for allegedly still looking to claim one-off payments from suppliers, and her organisation were embarrassed over issues around whether it had itself made payments promptly to suppliers.

So, back to the core issue. The win: win solution is clearly for big buyers to introduce an effective supply chain finance (SCF) programme, enabling them to manage working capital effectively, whilst giving suppliers the opportunity to receive prompt payment - at a reasonable and fair cost. It is economically efficient that firms who value prompt payment do pay something for that compared to those who don't require the cash so urgently.

As we have commented previously, the uptake of SCF - linked to the growth in electronic invoicing - is proceeding at a slower pace than most observers have expected. But we are confident that it will come in time - and the opportunity for those mutual benefits, rather than one-sided exploitation, are surely what will eventually make it commonplace.

 

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