Grocery suppliers are facing serious financial difficulties following a stand-off between suppliers and UK supermarket chains over who should shoulder the burden of the falling pound, new research indicates.
A study by insolvency firm Begbies Traynor found that 5,986 food suppliers were showing signs of ‘significant’ financial distress in the final quarter of 2016, a 13% increase on the 5,312 suppliers struggling in the same period in 2015. The supermarket chains were, by contrast, showing signs of financial stability with a 1% decrease in ‘significant’ financial distress over the last 12 months in light of strong retail sales.
The research comes as supermarkets and suppliers continue to negotiate contracts, many of which expire at the end of January. Suppliers aim to pass price increases seen as a result of the rising pound onto. Supermarkets themselves have warned suppliers to absorb the price increases brought about by sterling’s demise.
In 2016, British high-street retailer Tesco and Unilever, one of its biggest suppliers, were embroiled in a very pubic row after the supplier proposed a price increase of 10%.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.