Tesco angers small businesses with exit from prompt payment plan

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Tesco PLC (LSE:TSCO) (LSE:TSCO) has come under fire after leaving the government-backed Prompt Payment Code, which helps small suppliers being treated fairly.


The grocer did so just before the programme tightened rules to ensure payments to companies with fewer than 50 employees are made within 30 days instead of 60 as it was previously done.


READ: Tesco bank to close all current accounts due to lack of demand


It said the change was not practical because it categorises suppliers based on how much volume it buys from them, rather than their staff numbers.


Tesco left the Code, which counts around 3,000 large corporations, on 22 June, The Times reported.


“Tesco’s shock decision is bad news for good corporate governance and for leadership,” Craig Beaumont, chief of external affairs at the Federation of Small Businesses, told the paper.


“Tesco has had months to improve its internal processes and report on payments to businesses with fewer than 50 employees. It’s not too late for it to do the work and show some leadership.”


During the pandemic, the supermarket chain paid its smallest suppliers as soon as invoices were cleared, then told them these measures would become permanent and they would be paid within five days instead of 14 as before.


For Tesco, the smallest suppliers are those selling GBP250,000 worth of goods each year, including VAT.




Five years ago, the FTSE 100 group was found in breach of industry rules as it “prioritised its own finances over treating suppliers fairly”, according to a report by the Groceries Code Adjudicator.


Shares rose 1% to 237.18p on Wednesday at noon.

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