By Jonathan Davies

Tesco will be investigated by the new Groceries Code Adjudicator (GCA) over its relationship with suppliers, due to growing concerns that it breached the Groceries Supply Code of Practice.

The UK's biggest supermarket is already under investigation by the Serious Fraud Office (SFO) and the Financial Reporting Council (FRC).

The GCA said there was "reasonable suspicion" that Tesco has broken the code and will investigate its payments made to suppliers.

In a statement, Business Secretary Vince Cable said: "Last week I secured the final agreement in government to proceed with legislation to enable the regulator to impose hefty fines for those supermarkets found guilty of mistreating suppliers."

But Christine Tacon, the GCA's adjudicator, said that she won't be able to fine Tesco, because any offence will have taken place before she was given the power to do so.

Ms Tacon said: "This is the first investigation I have launched and it is a significant step for the GCA.

"I have applied the GCA published prioritisation principles to each of the practices under consideration and have evidence that they were not isolated incidents, each involving a number of suppliers and significant sums of money."

Mr Cable said: "This is an historic day for the groceries code adjudicator and shows we have created a regulator that has real teeth.

I have also agreed an increase of almost 40% in the adjudicator's funding for the coming year, so that it can carry out more of its important work.

Now that a formal investigation has been launched, I would encourage anyone with any evidence of wrongdoing to come forward and to be confident of being able to do so confidentially, as their anonymity will be protected by law."

A Tesco spokesperson said: "We have worked closely with the office of the adjudicator since its creation to put in place strong compliance processes.

"An internal review we carried out and shared with the GCA identified some areas of concern.

"We have taken action to strengthen compliance and, as we have announced, we are changing the way we work with suppliers."

John Allan, national chairman of the Federation of Small Buisnesses (FSB) said: “We’ve seen lots of evidence that small firms are being unfairly squeezed by late payments in the food processing industry and other sectors, so we welcome the GCA’s investigation. We would encourage the GCA to use its new powers and include the major supermarket chains in the scope of the investigation.”

“Late payment can have disastrous effects on a small firms’ cashflow and pushes many businesses to the brink. We’ve raised the issue to the highest levels and have called for a full scale independent inquiry into the payment practices of big business. This needs to be in time for the next Government to set our payment culture in the right direction. There needs to be respect in the relationship between big businesses and firms in their supply chains.”

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