Almost one in three (32%) are owed between £1,001 and £5,000, which they say is having an impact on their cash-flow, and 56% state that late payment has become worse over the past year. More than 94% of the FPB's members surveyed called on the Government to set an example by paying its own suppliers on time.

"Late payment is on the rise, according to our research, with more than half of respondents saying it has become more of a problem over the last 12 months," said the FPB's Finance and Administration Director, Nick Palin. "The Government should be doing more, both by paying on time itself and by implementing measures to tackle the problem without increasing the burden of legislation faced by small firms."

The FPB is working with the Government to find non-legislative solutions to payment problems. Small firms already have a statutory right to interest (SRI) under the Late Payment of Commercial Debts (Interest) Act 1998. This allows them to charge interest on the debt they are owed, but relatively few take advantage of it.

Mr Palin added: "The research shows that worrying trends are emerging. Supplier abuse appears to be widespread, and many smaller firms are in a catch-22 situation, fearing that, if they take action and use the legislation to charge interest, these larger companies will simply refuse to deal with them again."

Many large companies impose unilateral changes to contractual terms, with little or no warning. Last week, the FPB added Matalan to its Hall of Shame, which already contains 23 further companies that have squeezed their suppliers. The retail and homewares giant has declared that, from 1 September 2008, it is to pay suppliers 2% less on each invoice in order to fund advertising and marketing campaigns, and other developments.

"A change to contractual terms cannot be made unilaterally. This is a simple matter of contract law," said the FPB's late payment adviser, Stuart Blake, who was commenting on the move from Matalan. "Suppliers receiving underpayment on deliveries made under contracts agreed before the date of this letter will automatically be entitled to interest under the terms of their original contracts or under the LPCD(I) Act. What is more, if their entitlement stems from the LPCD(I) Act, they will be entitled to a late payment penalty charge as well, assuming their contract post-dates August 2002."

Mr Blake added a note of caution: "Suppliers should be careful about fulfilling orders received after this letter was sent, since to do so may indicate acquiescence, and therefore ‘acceptance', of the new terms the letter seeks to impose."

He said suppliers should emphasise to Matalan that they will only provide goods on the original terms agreed, or try to negotiate new terms that are more favourable, but warned that the company has an ‘absolute right' to place no further orders with them.

The last entry before Matalan to the Hall of Shame was Alliance Boots, which told its suppliers it was extending the time period within which it would pay them and demanded a 2.5% discount for the privilege.

The majority of the FPB's members surveyed (72%) said that the standard payment period set out in their contracts is 30 days. The FPB deems 30 days to be an acceptable amount of time in which to expect payment.

The FPB's members were also asked which methods would be most effective in combating late payment. The most popular included charging an automatic late payment fee of 11% (40.9% of respondents) and a code of conduct (20.5%).

The FPB is protesting against payment abuse as part of its ‘Think Smallest First' campaign. For more information about the other companies ‘named and shamed' by the FPB, visit www.fpb.org/hallofshame.