Food producers hit by supermarket battle

As supermarkets, including Asda and Morrisons, battle to win back budget-conscious shoppers, firms who supply major UK food retailers are under increasing financial pressure, research from the business recovery firm found.

The number of UK food retailing businesses experiencing significant financial distress in the first three months of the year was up 66 per cent on Q1 2014, to 4,696.

The food and beverage manufacturing industry saw a 94 per cent spike in firms under pressure, to 1,414 nationally.

In Yorkshire, there were 129 producers struggling to make ends meet in the first quarter of the year, up from 66 last year – a 95 per cent increase.

Food and drug retailers also saw a 37 per cent rise in significant distress, with 392 companies struggling.

Julian Pitts, regional managing partner for Begbies Traynor in Yorkshire, said: “The four main UK supermarkets are continuing to cut prices as a core component of their turnaround strategies and these mass price reductions are having severe consequences for less established food retailers and suppliers in Yorkshire, particularly SMEs, who now seem to be locked in a David and Goliath-style battle; although this time it appears David can’t win.”

Begbies Traynor’s Red Flag Alert research for Q1 2015 also found companies in the region have put investment on hold as the General Election looms.

Uncertainty over the outcome of the vote has led to “stagnation” in all sectors, Mr Pitts said.