One of the UK’s biggest food manufactures has told small businesses that they must make an “investment payment” in order to stay on its preferred supplier list, it has been revealed.
Some SMEs were asked to pay thousands of pounds to the company, which owns well-known brands such as Bisto, Sharwood’s and Mr. Kipling. with no guarantee of future orders. Suppliers were threatened with “de-list” if they did not comply.
“Premier Foods should be ashamed of themselves. Driving a hard bargain with your suppliers is one thing, but demanding a cash gift under the threat of delisting, is downright unfair,” said John Allan, National Chairman of the Federation of Small Businesses.
The FSB has long campaigned for fairer supply chain practices for SMEs, saying that onerous terms and delayed payments from big business customers can push smaller companies to “breaking point.”
Research carried out by the group, which provides support to SMEs and lobbies for their interests, found that one in three of its members had had their growth restricted by late payments. The disruptions to cashflow that late payments can create also have a knock-on effect for many businesses, with a third saying that they struggled to pay their own suppliers in turn, and 15% experiencing difficulties in paying staff.
The latest revelations about Premier Foods’ “questionable” demands represents yet another “deterioration of payment practices,” says the FSB.
“If the questionable practice being attempted by the likes of Premier Foods becomes the accepted norm, it may well sink those small firms without the cash reserve to prop up their larger customers,” said Allan.
“The Government has a golden opportunity with the Small Business Bill to take a firmer stance on payment practices. It also needs to do more to toughen up the prompt payment code, making membership more than just inclusion on hollow list of big companies.”