Food suppliers squeezed as supermarkets play hardball in Brexit price talks

Helen Cahill
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Premier Foods has emerged as the latest supplier embroiled in crunch talks

Food suppliers are being squeezed as supermarkets play hardball in talks over which side should shoulder the burden for the devaluation of the pound, new figures suggest.

Research from insolvency firm Begbies Traynor shows 6,000 food suppliers were showing signs of financial distress in the final quarter of 2016, an increase of 13 per cent on the year before.

Read more: Manufacturing giant Premier Foods considers price rises due to Brexit vote

However, supermarkets – which benefited from bumper sales at the end of the year – were showing signs of stability.

The figures come as supermarkets and suppliers renegotiate contracts; food retailers' contracts with suppliers often expire at the end on January. Several suppliers are trying to use the opportunity to increase prices, and offset the cost inflation that has set in due to the fall in the value of sterling since the Brexit vote.

Julie Palmer, partner at Begbies Traynor, said the research showed supermarkets were playing "hardball" with suppliers, and that the supermarket industry's improved financial position was not feeding through to the supply chain.

Read more: Was Marmite-gate a PR disaster for Unilever?

Last year it emerged that Unilever was trying to increase its product prices by 10 per cent – landing it in a public stand-off with the UK's biggest supermarket, Tesco. And, this week, City A.M. learned that Premier Foods is also trying to get the grocers to agree to higher prices.

But such negotiations will have proved difficult for smaller businesses.

Mark Jones, solicitor and retail specialist at Gordons law firm, said: "Most suppliers are trying or have tried to negotiate price on the back of the fall in the pound. But unless you are a very large supplier, there is very little room for negotiation."