Tracy Ewen, managing director of IGF Invoice Finance, comments on supermarket price wars hitting producers in the pocket:
“It’s of huge concern that the number of food and drink manufacturers suffering ‘significant’ financial distress has almost doubled in a single year.
Price wars we are currently seeing in supermarkets are yet another example of the big grocers battling for competitive market share, with little thought for their suppliers who are being forced to accept lower costs. Alongside constantly extending payment terms, this competition to provide consumers with the cheapest products is increasing cashflow pressures on SME suppliers . For a balance to be struck in this David vs. Goliath battle, suppliers must consider all their options for a more sustainable future.
If nothing changes, we may see small companies fold unnecessarily. This will have a severe impact on how the supermarkets themselves are able to operate and will cause a damaging knock-on effect to the economy as a whole. It is only right that the protection of SME suppliers to the UK’s largest companies is rapidly climbing the political agenda as calls for the government to introduce stronger regulation increase.
For those firms mired in long payment terms, there are options available that cover the gap between work completed and money in the bank. It’s therefore important for firms to thoroughly review their options and make use of any free financial advice that their financial partners and suppliers can offer. Firms should make these considerations before allowing pressure from large customers to impact their growth or operations.”