The Competition Commission has been further encouraged to focus its attention on local markets across the UK, as new research suggests the grocery supply chain has shrunk by 20% since 1994.
Business advisory firm Grant Thornton has suggested the investigation must be ‘accelerated’ as supermarket power is ‘contributing to the decline’ of smaller retailers, wholesalers and manufacturers at an ‘alarming rate’.
According to the firm, there were 246,555 VAT registered businesses in sectors such as food and drink retail, food processing and manufacturing at the beginning of 1994.
By January 2006 this figure had fallen to 191,390, against an economic backdrop where VAT registrations as a whole increased by 14% in the same period.
Duncan Swift, head of Grant Thornton’s food and agribusiness recovery group, is in no doubt where the blame lies:
“Over the past 12 years, many grocery supply chain operators will have simply dissolved, perhaps due to a lack of succession and some will have been bought out,” said Swift.
“However, this supply chain has also suffered almost 8,500 insolvencies since 1994, largely as a result of businesses failing to cope with a market where consumer taste was rapidly changing, but crucially, the ever stronger competition from the supermarkets.”
“The reality in the market is one of grocery suppliers to UK supermarkets that are increasingly finding themselves under major financial distress caused by the market power wielded by the major multiples.”
© Crimson Business Ltd. 2007
