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Small businesses financially hurt by unfair contract terms, survey suggests

24 Aug 2016

A new survey suggests that over half of small businesses have been hurt financially by unfair contract terms with suppliers, costing nearly 4 billion in the last three years.

Research by the Federation of Small Businesses (FSB) found that 52% of small businesses complained of having suffered from unfair supplier contracts.

The main complaints were: suppliers failing to make auto-rollover clauses clear up front (24%); being tied into lengthy notice periods (22%); high early termination fees (20%) and concealing details in small print (20%). 

One in ten of those affected by unfair terms claimed to have lost more than 5,000 dealing with a single problem with a supplier, while 37% had been set back by more than 1,000.

Mike Cherry, National Chairman of the FSB, 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.

‘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 way to consumers, but they don’t have the same guarantees of quality or legal redress in an unfair situation.’

Some 40% of the small businesses surveyed claimed that they felt powerless to do anything about unfair contract terms because the supplier was too important or large to challenge.

The FSB has called on the Government and regulators of energy, financial services and telecoms to ‘more routinely and explicitly focus on small business vulnerabilities’, and argues that ‘Trading Standards should also be given the power to take action against suppliers imposing unfair terms’.

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