Tesco treated suppliers unacceptably, says watchdog
Britain’s biggest retailer has been found to have deliberately delayed payments to its suppliers in order to meet its own financial targets.
The Grocery Code Adjudicator found an “unacceptable and unreasonable” culture of obstruction and misinformation among Tesco’s finance and buying teams when it came to dealing with supplier payments.
Internal emails and even staff training guides revealed that employees were encouraged to withhold payments to suppliers until after certain dates in order to avoid underperforming on targets.
A Tesco list of methods for meeting its half-year target included: “Not paying back money owed”.
Tesco was even found to have made “unilateral decisions” to deduct money from suppliers without consultation, and demand payments in the millions of pounds from some suppliers to meet its margins.
The supermarket giant was also too often unable to resolve simple supplier payment issues, even when it acknowledged that a debt was owed. Data errors that lead to payment problems were unreasonably common, the watchdog’s report said, and the process by which these could be resolved were unfairly drawn-out.
Christine Tacon, the Groceries Code Adjudicator, said that her year-long investigation uncovered occasions where money was not payed to suppliers until over 12 months later, with some amounts taking up to 24 months to be repaid.
“I saw many examples of large amounts owed to suppliers, of which money owed for duplicate invoices formed part of the total”, Ms Tacon said in her 60-page report.
She saw evidence of an occasion when £2 million took over 12 months to be repaid to a supplier that had been invoiced twice.
In a series of recommendations, Ms Tacon said that finance and buyer teams needed to be retrained in the findings of her report to stop these problems from resurfacing.
She also acknowledged that the door was open to potential criminal charges being levied against Tesco employees as her investigation doesn’t override an ongoing probe by the Serious Fraud Office.
Ms Tacon said: “The Serious Fraud Office’s investigation may result in the institution of criminal proceedings.”
The supermarket watchdog cannot levy a fine against Tesco only because its power to do so was introduced April 2015, three months after the GCA investigation began.
Anna Soubry, the business minister, said: “Christine Tacon has done a thorough and fearless investigation into a scandalous situation. Tesco say they have changed their practices and I very much hope they have.”
Dave Lewis, the Tesco CEO, issued a statement apologising for what he called “unsustainable and harmful” historic practices.
“I am grateful to the Adjudicator for the professional manner in which the investigation has been conducted. We accept the report’s findings, which are consistent with our own investigation”, he said
“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed.”