The Federation of Small Businesses has criticised Debenhams after it emerged that the department stores chain was asking for discounts in return for receiving earlier payments.
Debenhams wants a reduction of between 1-2% in suppliers’ prices in exchange for making payments 30 to 60 days earlier. It is the second time in three years that the retailer has proposed changes to suppliers’ terms in the run-up to Christmas.
The federation accused Debenhams of poor payment practice. “Businesses have a responsibility to pay their suppliers in a timely fashion,” said Mike Cherry, FSB national policy director.
“Large firms should not be permitted to award themselves an automatic discount for doing what they should - pay on time.”
“Smaller suppliers faced with unreasonable terms should seek to check if customers are signatories to the prompt payment code and if so – to make a complaint. In future they should seek to report this to the government-proposed small business commissioner.”
Debenhams said it was making its proposal in response to requests from some of its suppliers for earlier payment terms. It said the change in arrangements was entirely optional.
“The scheme is entirely optional as was made clear in our communication to our suppliers, and is intended to help their cashflow at peak periods,” said Debenhams. “The offer has been welcomed and we continue to maintain strong relationships with our suppliers.”
The move comes two years after the department store chain demanded a 2.5% discount eight days before Christmas in a move that was dubbed the “Santa tax”. The retailer’s finance director at the time, Simon Herrick, was criticised for the move and later left the business.
Debenhams chief executive, Michael Sharp, recently announced he was stepping down from the group after five years at the helm after reports of shareholder unrest.
“We are concerned and disappointed by this latest example of poor payment practices from Debenhams,” said the federation’s Mike Cherry. “Sadly it is not the first time we have seen the retail giant behave in this way and would have hoped that by now, it would have improved its behaviour.
“It is simply unacceptable for any company to exploit its market position to enforce unfair and unreasonable payment terms,” he said.
“It is time to put a stop to big businesses using their size and power to force small firms to accept late payment, excessively long payment terms, or demand automatic discounts simply for paying on time.”
•This article has been amended. We originally reported that Debenhams wanted a 2-3% reduction. The correct figure is 1-2%.
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