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The number of UK food suppliers experiencing ‘significant’ financial distress has increased by 54% in 12 months according to Begbies Traynor.
Back in April we reported that as supermarkets battle to be top dog, UK food suppliers suffer, highlighting the need for them to cut costs.
That brutal trend seems to have accelerated as the UK’s large supermarkets strive to win back customers from the German discounters such as Aldi. Slashed prices and delayed payments to suppliers mean the food retail industry has never been tougher, especially for smaller food suppliers such as independent grocers and farmers.
Begbies Traynor’s red flag research for 2Q15, which monitors the financial health of UK companies, found the UK’s food retailers continue to experience rising ‘significant’ financial distress, increasing by 38% over the past year. Of those facing difficulties, a massive 97% are SMEs.
But it is food suppliers that are really bearing the brunt of supermarkets new turnaround strategies: the research estimates that 1,463 SME food suppliers are in trouble, making up 89% of struggling companies within the sector.
Unfortunately the situation is set to become even bleaker – the harsh reality is that price slashing is not just a short-term pain but something that’s here to stay, says Julie Palmer, partner and retail expert at Begbies Traynor. “The supermarkets have managed to successfully rebase their own models by reducing product ranges … while failing to clean up their act on late payments, taking more than a month longer than agreed terms to settle debts with suppliers. Some are even looking into launching their own food manufacturing facilities to give them even tighter control over costs and the ability to offer still more aggressive pricing.”
With the pressure on food industry SMEs unlikely to abate any time soon, cutting overheads is more crucial than ever. In the battle to shore up earnings, overspending on business energy is often overlooked. As an expert in offering no-fuss business electricity and gas compare and switch services, SwitchMyBusiness.com can help. The whole process takes less than 20 minutes and you could save up to 50%. Just fill in our short form (also at the top right of this page) or give us a call on 0330 0100 251.
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