Credit: Robert Edwards/Geograph

Tesco 'deliberately' delayed payments to suppliers

The supermarket will get away with a slap on the wrist, but more serious sanctions could be on the way.

by Jack Torrance
Last Updated: 19 Apr 2016

It’s going to be a good while before Tesco can move on from its £326m accounting scandal that erupted in 2014. Today the Groceries Code Adjudicator (GCA) Christine Tacon said her investigation into the troubled supermarket had found it broke said code, which governs the relationship between grocers and their supply chain, by deliberately delaying payments to its suppliers. 

Supplier relations has become a controversial topic in the last few years after growing discontent, particularly among small manufacturers, about late payment of invoices and so-called ‘pay to stay’ (on the shelves) demands from big retailers and other clients. 

‘These practices are now so widespread that they are seen as acceptable procurement methods, aimed at extorting as much cash as possible from the very suppliers who do much to ensure that the manufacturing and retail monoliths have the right products in the right place at the right time,’ the Forum of Private Business’s chief exec Phil Orford wrote in MT after Mr Kipling maker Premier Foods was accused of demanding cash from its small suppliers.

Tacon’s investigation found that Tesco ‘knowingly delayed paying money to suppliers in order to improve its own financial position,’ – something she rightly regards as a ‘serious’ breach of the code. Unfortunately for those hoping to see a bit of retribution, the GCA is pretty much toothless. She has made some recommendations about how Tesco could improve its relationship with suppliers and told it to make its processes more transparent (something chief exec Dave Lewis would say it is doing already) but wasn’t able to levy a fine against the supermarket.

But Lewis won’t be getting out the Tesco Value party balloons just yet. The company is still under investigation by the sharper teeth of the Serious Fraud Office, which most certainly does have the power to slap it with a fine, or even to bring about criminal prosecutions. The SFO is certainly in need of a prize scalp after a string of failed prosecutions. 

The investigation has been dragging on for some time, but some analysts reckon it could report this week. Mike Dennis of Cantor Fitzgerald told the Guardian that the SFO could hit Tesco with a fine worth 1% of its UK grocery revenues, around £350m. Combined with repayments to aggrieved suppliers, its total bill for the misdeeds could hit half a billion.

Add to that a third probe by the Financial Reporting Council, the fact that Tacon also referred to Tesco to the Competition and Markets Authority, and the broader challenge of Britain’s dismal grocery market and it’s clear that Lewis has plenty of obstacles to overcome yet.


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