Tuesday, 30 May 2017 08:45

‘No Problem’ - Grocery Regulator Under Fire for Dismissing Late Payments Issue

The Grocery Code Adjudicator (GCA) has attracted sharp criticism for claiming that there is “no evidence” that late payments by supermarkets cause problems for suppliers.

Christine Tacon made the comments to Food Manufacture magazine, claiming that in the four years she has been in the role, retailers were honouring an average of 98 per cent of invoices on time.

The remarks have attracted disbelief and outrage from suppliers’ representatives in the industry. The Food and Drink Federation (FDF) pointed out the the government recognised there was a chronic cross-industry problem with late payments affecting SMEs, which make up 96 per cent of UK food and drink manufacturers.

The industry body said it backed plans to force large companies, including the big supermarkets, to be much more transparent about their payment practices.

An insolvency expert specialising in the food and drink industry, meanwhile, has claimed that since it was set up in 2013, the GCA has been completely toothless in enforcing fairer financial practices in the grocery sector. Duncan Swift, a partner at Moore Stephens, claimed that Tacon’s office had investigated less than two per cent of cases involving allegations of unfair purchasing and payment practices by supermarkets.

Public Outrage

The GCA was set up with a legal remit to oversee the trading practices of the big 10 supermarkets, and make sure they stuck to a new code of conduct covering, amongst other things, payment terms and contractual obligations.

The move followed a number of well-publicised stories which sparked outrage about the behaviour of supermarket buyers and accounts departments towards small suppliers, with incidents of businesses and lives being wrecked by punitive payment terms and non-payment of invoices.

Three years ago, we ran a story on this blog about a dairy free chocolatier which was forced to issue a winding up petition against Tesco after non-payment of an invoice left the firm unable to pay staff over Christmas. This was a year after the GCA was set up.

Content continues below

Credit Control for Freelancers & Contractors [Infographic]

We regularly speak to Freelancers and Contractors who are uncertain on how to handle the credit control process after an invoice has been issued. Credit Control (occasionally called "Dunning") is no…

Fraud warning: increase in “Fake CEO” fraud

Small and medium sized businesses need to be aware of a rising wave of frauds affecting companies big and small. The current most frequently used type of fraud is often called “Fake CEO Fraud” and…

Counting the financial cost of poor credit control

The world of credit control brings to mind the infamous Donald Rumsfeld quote: "There are known knowns; there are things we know that we know. There are known unknowns; that is to say, there are…

The Right and Wrong Way to Check Credit

We recently wrote about a large fraud case involving at least six connected companies. Each of these companies used false accounts, identity theft and fake documents to achieve large amounts of…

The GCA now appears not only toothless, but out of touch. Tacon’s comments fly in the face of all the latest research on the topic. Yet another report, this time by Siemen’s Financial Services, has underlined the scale of the problem facing SMEs, suggesting small businesses lose £250 billion a year in cash flow from unpaid invoices, amounting to 14% of turnover.

Levelling the Playing Field

There is also something disingenuous about Tacon’s comments. In the grocery sector in particular, the issue is not just invoices going unpaid, but the length of the payment terms the big, powerful retailers force onto suppliers. There seems to be a culture amongst supermarket buyers of viewing the longest possible payment terms as delivering a ‘competitive advantage.’ And whilst terms or 90 or even 120 days might suit the big players, for small suppliers, it makes cash flow management virtually impossible.

The GCA has done nothing to curb this issue, and it appears the government has woken up to this too. The Department of Business, Energy and Industrial Strategy is currently undertaking a statutory review of the GCA. Hopefully that means the government is coming to its senses, and will realise the late payment culture just cannot be tackled with arbitrary regulators. Why would the supermarkets listen to an adjudicator who has nothing to threaten them with should they choose not to comply?

The only solution to rescuing the billions of pounds owed to our SME suppliers, and levelling the playing field on payments, is to strengthen the statutory rules on payment and the consequences for not abiding by them.

Image Joker by Daniel Wilmsen is licensed under CC BY 2.0

8:00 - 20:00

8:00 - 20:00

Our Opening Hours Mon. - Fri.

+44 (0) 1772 454505

+44 (0) 1772 454505

Got questions? Call us today. No hard sell, guaranteeed. 

© 2017 Safe Collections is a trading name of Safe Collections Limited. Company Number: 01815264. VAT Number: GB407358159. All Rights Reserved.