Unfair supplier terms cost small businesses £1.3bn a year

Many small beauty salons could be unwittingly losing money due to unfair supplier contract terms, says the Federation of Small Businesses (FSB).

The association conducted research into small UK businesses and uncovered a collective loss of £4 billion over the last three years caused by unfair or unclear contract terms.

The main issues include suppliers failing to make the guidelines of auto-rollover clauses clear, writing in long notice periods to end a contract, demanding high early termination fees and “concealing” crucial details in small print. 40% of respondents from the small businesses asked considered their suppliers too powerful to challenge about these points.

The FSB said more protection is required for businesses. One suggestion is to grant Trading Standards the power to take action against suppliers for unfair terms. However, the research also highlighted the importance of due diligence before entering into an agreement with a supplier to avoid any nasty surprises further down the road.

FSB national chairman Mike Cherry 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.

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