Small firms ‘stung’ by unfair contracts

New research from the Federation of Small Businesses (FSB) suggests that 52 per cent of small firms have been stung by unfair contract terms with suppliers, costing nearly £4 billion in the last three years.

‘Treating Smaller Businesses Like Consumers – Unfair Contract Terms’, sheds light on the scale of the problem, and suggests that 2.8 million small firms have suffered because of unfair contract terms. 75 per cent of those affected had been stung twice or more in the past three years.

This is in part due to suppliers not making auto-rollover clauses clear up front (24 per cent), tying businesses into lengthy notice periods (22 per cent), charging high early termination fees (20 per cent) and concealing details in small print (20 per cent).

One in ten (11 per cent) small businesses affected by unfair terms were set back by more than £5,000 dealing with a single problem, while two in five (37 per cent) lost more than £1,000 through an unfair agreement with a supplier.

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.

“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.”