South: FSB finds unfair contract terms costing small firms billions

New research from the Federation of Small Businesses (FSB) suggests that half (52%) of small firms have been stung by unfair contract terms with suppliers, costing nearly £4 billion in the last three years. Most of those affected (75%) had been stung twice or more in the period. One in ten (11%) small businesses affected by unfair terms were set back by more than £5000 dealing with a single problem. Two in five (37%) lost more than £1000 through an unfair agreement with a supplier.

Suppliers are failing to make auto-rollover clauses clear up front (24%), tying businesses into lengthy notice periods (22%), charging high early-termination fees (20%) and concealing details in small print (20%).

Two in five respondents (40%) said they felt powerless to do anything about unfair contract terms because the supplier was too important or powerful to challenge. Clearly small firms can be just as vulnerable as consumers when buying goods and services, and they need better protections.

Mike Cherry, FSB national chairman, said: “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.”

He suggested that “to drive change in this area, Government and regulators of energy, financial services and telecoms should more rout routinely and explicitly focus on small business vulnerabilities. Trading Standards should also be given the power to take action against suppliers imposing unfair terms.”