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Unfair contract terms costing small firms billions

More than half (52%) of small firms have been stung by unfair contract terms with suppliers, new research from the Federation of Small Businesses (FSB) suggests, costing nearly £4 billion in the last three years.

Mike Cherry, FSB National Chairman
Mike Cherry, FSB National Chairman

The research reveals that 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 (40%) of respondents said they felt powerless to do anything about unfair contract terms because the supplier was too important or powerful to challenge.

The FSB research, Treating Smaller Businesses Like Consumers – Unfair Contract Terms, highlights how small firms can be just as vulnerable as consumers when buying goods and services so they need better protections. The FSB says Government and regulators of energy, financial services and telecoms should more routinely and explicitly focus on small business vulnerabilities. Trading Standards should also be given the power to take action against suppliers imposing unfair terms.

Mike Cherry, FSB National Chairman, said: “If small firms were better protected when entering a contract with a supplier, they would have more confidence and trust in the market. Suppliers would be more accountable and businesses would spend less time and money dealing with the fallout. Tackling unfair contract terms would lead to a more efficient and competitive economy.”

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