Fifth of small businesses are victims of supply chain bullying

One in five small businesses have been the victim of "supply chain bullying" in the past two years, the Federation of Small Businesses (FSB) has revealed.

Some 17% of 2,500 FSB members claimed that they had faced bullying, which the FSB described as "a serious deterioration of payment practices".

The report comes in the wake of a Newsnight investigation which revealed that Premier Foods, the brand behind Ambrosia and Mr Kipling, had been allegedly asking for payments from its suppliers to continue doing business.

This practice, known as "pay to stay" is one of the most common forms of supply chain bullying.

"Pay you later" is another, in which the company uses excessively long payment terms to avoid paying interest to the supplier.

The FSB also said some companies will change payment dates after the initial payment date has been agreed upon, while some companies apply retrospective discounts to outstanding money owed to suppliers.

The FSB chairman john Allen called for a toughening up of the UK's prompt payment code, adding that his members are "fast approaching breaking point".

Allan said: "The Government has indicated that they are prepared to do more to improve the culture of payment practices in the UK and they are right to do so.

"The sense I get from talking to our members is that small businesses are fast approaching the breaking point. They are no longer prepared to put up with these sharp practices.

"Brands that think they can continue to squeeze their suppliers with impunity may get a nasty shock when what they are doing comes to the attention of their consumers" he said.