Big four supermarkets told to speed up payments to small suppliers

Message: Food and Farming Secretary Hilary Benn told the big four supermarkets to pay suppliers more quickly

Message: Food and Farming Secretary Hilary Benn told the big four supermarkets to pay suppliers quicker

The big four supermarkets were called to emergency talks in Whitehall on Monday and asked to pay suppliers, including farmers, more quickly.

Food and Farming Secretary Hilary Benn put store bosses on notice that delays in paying invoices are draining the lifeblood out of small firms.

The initiative is designed to help with cash flow and is part of a wider plan to help small businesses which was announced by the Prime Minister last week.

It includes a pledge that central government will move to paying all invoices within ten days rather than the existing 30.

Following the meeting, Mr Benn said: 'Small businesses are far more susceptible to the timing of payments than bigger companies.

'A single late payment can be the difference between survival and collapse. That will be truer than ever in the coming weeks.

'I asked supermarket leaders to do all they can to process payments as quickly as possible to help the small suppliers that are the lifeblood of their industry through turbulent times.

'I have also spoken to the Food and Drink Federation and I hope all major food suppliers who work with the small businesses and producers which ultimately feed us will take action.'

Delays by corporate giants in paying their suppliers are particularly painful at the moment because small firms are being hit with punishing charges by their banks.

Interest rates on business account overdrafts and loans have spiralled as a direct result of the global credit crunch.

Sources at the food and farming department, DEFRA, said: 'Ministers are concerned that small businesses will be increasingly reliant on prompt payment for survival.

'Hilary Benn stressed that in the current climate, everyone in the food chain should be looking to speed up their payments to the small businesses that supply them.'

Some 51 per cent of small firms have seen an increase in the time it takes to be paid, according to a study published by the Federation of Small Businesses last week.

It described delays in payments as a 'cancer' and pointed out that one in ten business failures can be traced to the fact that large customers have failed to pay their invoices on time.

Supermarkets have been accused for many years of imposing unnecessary delays in paying bills. The main problem surrounds a system known as 'pay and deduct'.

They will pay a portion of the invoice and then argue for a deduction of the remainder, stringing out the process and keeping the money in their accounts.