Food producers 'suffering 45-day payment delays'

Figures from online business finance supermarket Funding Options, which analysed the UK’s biggest 200 food producers by turnover, suggested the typical time taken for supermarkets to pay their suppliers had edged up slightly from 44 days last year.

The increase came despite many of the UK’s largest supermarkets, including Tesco, Sainsbury’s and Asda, signing up to the Prompt Payment Code, which theoretically sets a 30-day target for businesses to pay suppliers.

Supermarket chains have been working hard to improve their relationships with suppliers.

Asda said in May, for instance, that it would offer 14-day payment terms to its small suppliers who have up to £250,000 of business with the grocer.

But Funding Options said the ongoing consolidation in the grocery sector could “worsen” payment delays as companies wield ever-growing buying power.

Sainsbury’s has agreed to merge with Asda in a £13bn deal, while Tesco has purchased Booker and struck a buying alliance with French grocery Carrefour.

Many analysts believe the deals will lead to a further squeeze on suppliers – and Funding Options said any late payments from supermarkets, “effectively demanding loans from their suppliers interest-free”, would “seriously impact” cashflow and financial stability.

Funding Options chief executive Conrad Ford said: “Food producers are suffering from longer waits for payment as the supermarkets wage a price war amongst each other.

“Supermarkets may be able to delay payments even longer as they consolidate their sector further. The M&A 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.

“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.”