One in five small businesses suffer from “bullying” at the hands of the companies they supply, according to a study by the Federation of Small Businesses (FSB).

The revelation comes hot on the heels of news that Premier Foods has charged suppliers for the right to stay with the business. The FSB is calling for new rules to combat discriminatory practices by big firms such as retrospective discounting and “pay to stay”.

Other practices outlined in the report include excessively long payment terms of 120 days or more, which essentially becomes an interest-free loan from the supplier to the client business.

Late payment remains a perennial problem for small businesses and some companies have even awarded themselves arbitrary discounts of 3% if they pay on time – even if this is 120 days after the delivery of goods.

Retrospective discounting involves companies changing the terms of signed contracts after suppliers have delivered. The FSB says tactics include threatening to withhold payment, de-listing from supplier agreements and un-agreed ‘marketing contributions’.

John Allan, chairman of the FSB, said: "When the public think of their favourite brands, they are unlikely to connect them with the sort of immoral payment practices which are becoming all too common across an increasing number of industries.

“However, it is clear that whenever these examples come to light, the public shares the same sense of moral outrage as the small firms that have to put up with them on a daily basis.”