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FPB calls for 'fair play' on supermarket payment terms.

A leading business pressure group is heartened by the statement from Environment Secretary Margaret Beckett that called for supermarkets to 'stop squeezing their suppliers.'

The Forum of Private Business (FIB) believes the announcement has come at an ideal time, given the recent decision by supermarket giant Sainsbury's to impose new payment terms on suppliers, which means many will have to wait an extra four weeks for payment.

Sainsbury's announced that it intended to change its terms of business and has written to 1,400 suppliers informing them that instead of settling invoices within 21 days, suppliers will now have to wait up to 49 days for payment.

Andrew Mowlah, FPB Head of Research said, "It's hard enough for small suppliers to maintain profitability when supplying supermarkets due to the pressure they are under to continuously reduce costs; in fact, Sainsbury's insisted on suppliers reducing costs by one per cent across the board only recently.'

"Undoubtedly, Sainsbury's will see a benefit in their bottom line from this move, but what about the owners of the smaller businesses that supply them? They will have to contend with the disruption to their cash-flow, will still have to pay their suppliers under existing agreements and, to top it all, will be getting less for their products.'

"Promoting a culture of prompt payment is in the interests of the UK economy,' said Mr Mowlah. "Nigel Griffiths, the Small Firms Minister, has in the past said, 'Large firms imposing lengthy payment terms hits smaller suppliers. While things have improved, late payment is still a problem that can have a crucial impact on the survival of a smaller business. More large farms need to learn to play fair.' The Environment Secretary's announcement serves to further ram home the message that big supermarkets 'need a sustainable UK-based supply chain, and that it is not in their interests to squeeze suppliers to the point of elimination.'"

"The FPB has campaigned for a number of years to improve the UK's payment culture,' said Mr Mowlah, "and although much progress has been made, this latest development represents a backwards step. We would urge the likes of Sainsbury's to look closely at their payment terms and see if they are being fair to the businesses on whom they depend for the success they have enjoyed over the years."

The FPB is a founder member of the Better Payment Practice Group and was instrumental in getting a Statutory Right to Interest (SRI) on late payment added to the statute books, and has written to the Trade and Industry Secretary Patricia Hewitt to raise its concerns.

The FPB would like to see the Voluntary Code of Practice replaced with a Statutory Code that would offer real protection to smaller suppliers and some form of redress when faced with unfair payment practices.

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Title Annotation:INFORMALIA
Publication:Food Trade Review
Geographic Code:4EUUK
Date:Jun 1, 2005
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