Supermarket suppliers watchdog weighs into Tesco crisis
The government-appointed watchdog charged with enforcing better treatment of UK supermarket suppliers has weighed into the crisis engulfing Tesco.
Christine Tacon, the Groceries Code Adjudicator, has asked Tesco to inform her immediately if it finds anything in its investigation of a £250m overstatement of profit that is in breach of the code that governs the way supermarkets deal with their suppliers.
She has also offered to meet Deloitte, which is leading an investigation into the overstatement, to explain to them the sorts of behaviours that could constitute a breach of the code.
If Ms Tacon finds any breaches of the code, she could launch an investigation into the grocery industry’s dealings with suppliers.
Retailers found in breach of the code, which covers abuses such as retrospective changes to supply agreements and payment delays, can be forced to publish apologies or fined.
Ms Tacon’s intervention is the first indication of the watchdog’s interest in the problems that have plunged Britain’s biggest retailer into turmoil.
The development also comes amid increasing expectations that Tesco will launch a rights issue to boost its financial flexibility, as it has been put on watch for possible downgrade by several credit rating agencies.
Analysts at Nomura said on Tuesday that a rights issue had “got a lot more likely”. Tesco insisted that it had no plans to raise equity.
Tesco stunned the City last week when it said a £1.1bn forecast of first-half profit, announced only a month ago, had been overstated. The overstatement relates to the income that Tesco receives from suppliers, for selling more of their goods, or helping them to fund special offers.
Ms Tacon, who spent more than a decade running the Co-op’s farming business, said the meeting with Tesco was arranged by the supermarket chain.
Speaking at the Processing and Packaging Machinery Association show in Birmingham on Tuesday, Ms Tacon, said: “I have requested that compliance with the Groceries Supply Code of Practice is included in the scope of the internal investigation and I have asked to be notified if Tesco starts to find practices which might breach this code,” she said.
“The Groceries Code Adjudicator will take a decision on next steps based on the evidence,” she added.
Tesco said: “We are committed to the grocery code and have a constructive dialogue with the adjudicator’s office. We will inform the GCA of any issues which may have a bearing on the code.”
Dave Lewis, the new chief executive of Tesco, said last week it had asked four senior managers, including the head of the company’s UK arm, to step aside while the investigation took place. He said on Friday that Tesco must change its culture.