Small business are being squeezed as banks cut of credit and major firms refuse to pay their bills promptly, Ministers have been warned.
Lorely Burt (Lib Dem Solihull) “named and shamed” Boots for telling suppliers they could have to wait up to 100 days for payment. She urged the Government to put pressure on major businesses to treat suppliers fairly.
Ms Burt, the Lib Dem spokeswoman in small businesses, was leading a Commons debate on the problems facing small firms as a result of the economic downturn.
The 175,000 small businesses in the West Midlands make up 98 per cent of all firms in the region and employ 885,000 people.
But Ms Burt warned they faced a duel challenge of obtaining credit from increasingly-cautious banks and extracting payment from major customers.
Speaking in the House of Commons, she said: “Some businesses are being squeezed at both ends of the credit chain. Some large companies, including supermarkets and retail outlets, are arbitrarily changing their terms of business by extending payment schedules in their own favour to improve their cash flow. Boots, which I name and shame, has extended its terms from paying suppliers about 45 days after the delivery of goods or services to potentially more than 100 days.”
Ms Kirkbride added: “Is it possible for a Minister to put pressure on large companies to see whether their influence can persuade those companies to take a more responsible approach to their payment terms?”
Treasury Minister Angela Eagle said banks had made a commitment to make “competitively-priced lending” available to small businesses, as part of a recapitalisation programme which saw them receive £37 billion from the Government.
Following the debate, a spokesman for Boots owners Alliance Boots said: “Alliance Boots is committed to working with suppliers for mutual long-term benefit and believes that the group’s procurement strategies are in line with other groups of similar size and scale. We remain absolutely committed to working in partnership with stakeholders throughout the supply chain.”
Ministers were also urged to reverse the abolition in April of empty property relief, which meant businesses now pay far more tax on empty buildings.
Speaking in the Commons, Julie Kirkbride (Con Bromsgrove) said: “Although there may have been argument in favour of empty property taxes in the boom times, does he accept that they compound the problem in the down times? Will he reconsider the matter, to help small businesses and others to get through this difficult period?”
Treasury Minister Ian Pearson (Lab Dudley South) rejected the pleas, saying: “That relief was regarded as a £1.3 billion subsidy for owners of commercial property, and not for the small and medium-sized businesses that are the backbone of this country’s economy.”