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More protection needed for retail suppliers, consultant warns

01 March 2016

Smaller retail suppliers are being pushed out of business by late payments by supermarkets, a supply chain consultancy has warned. 

More protection needs to be offered to SMEs by the government, said Laura Magee, senior consultant at Crimson and Co.

The warning comes after the Groceries Code Adjudicator released a report condemning Tesco for late payments to its suppliers. 

“Especially when it comes to small businesses, a consistent cash flow is vital to grow and develop, while still ‘keeping the lights on’,” said Ms Magee. 

“Given that an SME’s cost of capital is higher than global enterprises (with banks typically providing better rates for larger than smaller companies), the strain on a SME is considerably more than the benefit a larger retailer gets from delaying payment.”

She added that there needed to be more legislation to protect smaller companies. 

“There is little protection for a company when it comes to long term payments,” she said. 

“The Grocery Code has gone some way to offer cash flow security, but it only protects suppliers who provide goods for resale rather than all suppliers of goods and services. Since supplier relationships often involve unequal balances of power, it is up to the supermarket or large supplier to decide whether they want to exploit their position or to take a positive partnership approach. 

“The latter is definitely a ‘win-win’ for the supply chain.”

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