Supermarket price wars are leaving food producers suffering with longer payment delays, new analysis shows.
Food producers are waiting 45 days to be paid on average, up from 44 a year ago, business finance facilitator Funding Options said in its analysis.
Just a few late payments can seriously impact food producers’ cashflow and financial stability.
In 2016, Tesco was investigated by the Groceries Ombudsman for deliberately delaying payments, with some suppliers having to wait more than a year to be paid.
The delays are despite the Prompt Payment Code, which theoretically set a 30-day target for businesses to pay their suppliers. Many of the UK’s largest supermarkets are signed up to the code, including Tesco, Asda and Sainsbury’s.
Conrad Ford, chief executive of Funding Options, also warned that payment delays could worsen as supermarkets increase their power over suppliers even more through a wave of mergers and acquisitions.
'Longer waits'
Sainsbury’s and Asda are currently in the process of merging, and Tesco recently completed a £4bn takeover of wholesale giant Booker.
“Food producers are suffering from longer waits for payment as the supermarkets wage a price war amongst each other,” Mr Ford said.
“Supermarkets may be able to delay payments even longer as they consolidate their sector further.
“The M&A (mergers and acquisitions) activity we are seeing in the supermarket sector will worry food producers who rely on healthy competition between retailers to win more sensible contract terms. Food producers are at risk of losing any negotiating power they had left.”
Mr Ford added: “Even with government initiatives such as the Prompt Payment Code, we are increasingly seeing food producers suffering from cashflow issues as a result of late payments.”
