FSB survey: 'Unfair contract terms costing small firms billions'

MORE than half of UK small businesses say they have been hit by “unfair” contract terms with suppliers, according to research putting the total cost to small firms at nearly £4 billion over the last three years.

The Federation of Small Businesses cited problems for firms in terms of contracts with some utilities and providers of professional services such as human resources and legal advice.

Small businesses voiced concerns that some suppliers were failing to make auto-rollover clauses clear up front, tying firms into lengthy notice periods, charging high early termination fees, and putting details in small print. Each of these issues was highlighted by at least 20 per cent of survey respondents.

Two in five small firms said they felt powerless to do anything about unfair contract terms because the supplier was too important or powerful to challenge.

Colin Borland, who is senior head of external affairs for devolved nations

for the Federation of Small Businesses and is based in Scotland, said: “The law seems to have this idea that, when a small business contracts with a large multinational, they are negotiating as equals. Of course we know it’s nothing like that.

“Smaller businesses are more like consumers and so should enjoy the same rights – especially when dealing with standard form contracts where there’s no negotiation.

He added: “That is why we have argued that the Scottish Parliament should use the new consumer advocacy and advice powers it now holds to offer smaller businesses the protection they need.”

Mike Cherry, FSB national chairman, said: “Small firms on the bad end of a deal are losing out to the tune of £1.3 billion each year. We have identified persistent problems with suppliers, across sectors, treating small firms unfairly. This suggests the market is failing to deliver value-for-money products and services for small business customers.”

He added: “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.”

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