The 146 supplier victims of the brutal supermarket price war

New research by accountancy firm Moore Stephens claimed that cost cutting is causing pain throughout the food supply chain, as supermarkets squeeze food producers in order to cut checkout prices.

Moore Stephens said the rise in food producer insolvencies is in stark contrast to the eight per cent fall in company liquidations in the economy as a whole over the 12 months to September.

Moore Stephens partner, Duncan Swift, who leads the firm’s Food Advisory Group, said: “The supermarkets are going through the bloodiest price war in nearly two decades and are using food producers as the cannon fodder.

“Supermarkets have engaged in questionable buying practices for years, but it’s getting worse and clearly wreaking havoc on the UK food production sec- tor.

“The fact that food producer insolvencies are rising so rapidly, while business insolvencies are falling overall, shows just how much pressure the sector is under.”

The report showed that over the past five years company liquidations as a whole have fallen, but insolvencies amongst food producers have increased.

Supermarkets’ tough treatment of suppliers was exposed by the accounting scandal at Tesco, which showed how supermarket buyers rely on supplier contributions to meet profit targets.

“UK supermarkets are trying to compete on price with Aldi and Lidl, but with profit margins that are far higher than these discount chains,” said Mr Swift.

“To try and make the maths work, the big supermarkets are putting food producers under so much pressure that we have seen a sharp increase in the number of producers failing.”

The report claimed that food producers feel unable to complain to the Groceries Code Adjudicator, as they risk losing important contracts.

Earlier this year Scunthorpe-based supplier Ready Steady Veg hit problems when it lost a major contract. It has been sold to Ready to Cook Veg.