Supermarket discounts put more than 100 food companies at risk, says report

More than 100 food manufacturing companies are at risk owing to price reduction initiatives adopted by supermarket chains to attract customers, says a new report.

According to the report released by insolvency specialists Begbies Traynor, the number of food suppliers in ‘significant distress’ doubled during the last three months of 2014, BBC News reported.

Currently, around 4,550 food companies are in financial crisis compared to the 2,878 firms reported last year. The number of firms in distress also increased from 733 in the last quarter of 2013 to 1,410 in the corresponding period last year, BBC added.

The report says that these companies will fall into administration by the end of the year if supermarkets do not resolve the issue of fair treatment of suppliers.

Begbies Traynor partner Julie Palmer was quoted by the Telegraph as saying: "With shocking increases in distress among the supermarkets’ main suppliers, the largest chains need to tread very carefully if they want to prevent a new crisis creeping up through their supply chain.

"Worryingly, with 3.6 million people employed in the UK food supply chain, the economic and political risks associated with the current price war are now reaching boiling point ahead of May’s election."

This difficulty results from the supply agreements with big buyers, which makes large discounts and slow payments possible. The trend has currently affected mostly the smaller companies.