U.K. Supermarkets Asked to Expedite Payments to Small Suppliers
As if anyone in the retail industry didn't know it, the current economic situation is hammering home an important message. Neither retailers nor suppliers can survive without credit. But when the retailers are big (read supermarkets) and the suppliers are small (read farmers), even the slightest alteration to agreed payment terms can be fatal.
According to the UK's Guardian newspaper, Hilary Benn, the environment secretary, "met leaders of the main food chains to emphasize that small businesses were far more dependent on the timing of payments than larger companies."
"A single late payment can be the difference between survival and collapse," Mr. Benn reportedly said. He described small businesses and farmers as "the lifeblood of the food industry" and said they should be helped through "turbulent times."
While the British government realizes they can't get directly involved in commercial arrangements, they are expressing concern about the ability of small companies to survive if they don't receive their payments promptly.
Mr. Benn's suggestions received a positive response from both the Federation of Small Businesses (FSB) and the National Farmers' Union (NFU). A spokesman from the former hoped that large companies would pay well before time. The NFU commented that anything that could be done to encourage early payment would be helpful. Lee Woodger, head of NFU's food chain unit, took the advice a step further, saying, "It would also be welcome if ministers emphasized the importance of sourcing food from Britain rather than abroad."
Discussion questions: Do you think supermarkets should be speeding up payments to smaller suppliers given the financial crisis? Why or why not?
[Author's commentary] Some supermarkets' relative munificence (read big profits) might be reaped over a longer period if their suppliers were paid more promptly but they might also benefit in the long run by helping the smaller companies to keep trading. Those same small suppliers might then be in a position to continue supplying their customers rather than finding that
to a significant degree their own profits were being used to subsidize bigger companies with greater room to maneuver.