Supermarket suppliers could go to the wall following price war

Begbies' 'Red Flag Alert' research found 1,410 businesses supplying UK supermarkets are struggling

The big four supermarkets have all revealed big price-cutting measures in recent months (Rex )

The supermarket price war could be close to claiming its first victims as the number of small food suppliers falling into financial difficulty has more than doubled, risking dozens of administrations and thousands of job losses, according to a leading insolvency firm.

The big four supermarkets have all revealed big price-cutting measures in recent months and it appears, according to Begbies Traynor, that suppliers are being squeezed. There have also been revelations of big suppliers delaying payments to their own suppliers.

Begbies’ “Red Flag Alert” research found 1,410 businesses supplying UK supermarkets are struggling – a jump of 92 per cent on last year

Julie Palmer, partner at Begbies Traynor, warned: “Unless the supermarkets start treating their suppliers more fairly and find longer-term solutions to their cost-cutting exercise, we can expect more than 100 of these 1410 “significantly” distressed food and beverage suppliers will fall into administration before the year is up.

“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.”

The warning comes after Sainsbury’s, Tesco and Morrisons all announced job cuts and store closures amid consumer demand for lower prices, fuelled by the rise of the discounters Aldi and Lidl.

But Ms Palmer explained: “The UK’s food producers and suppliers have failed to see any benefit from the rise in popularity of the German discounters Aldi and Lidl, since much of their canned and packaged stock is sourced from overseas.”

It was revealed last month that Premier Foods, which makes Mr Kipling and Ambrosia, was asking for “investment” payments from its own suppliers. Bosses later backed down after public and political pressure.

Price war: The big squeeze

Tesco Discounting 380 brands by 25 per cent. Previously said £200m was to be spent this year.

Asda Said 2,500 “essentials” including fruit and veg and nappies would see cuts, costing £300m. Had vowed to spend £1bn over five years.

Sainsbury’s Spending £150m on cuts to 1,000 products over three years, covering own-label and branded goods.

Morrisons £1bn to be spent over three years. More than 1,300 lines already cut.