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Fury at Premier 'pay to stay' move

A leading food company has sparked fury in the business world after asking its suppliers to give money if they want to remain on their books.

Premier Foods, which owns popular brands including Mr Kipling, Oxo and Bisto, has written to its suppliers asking for an "annual voluntary investment" to help fund its growth plans.

Firms that do not pay up risk being taken off its approved 1,000-strong supplier list.

The company said it had been "delighted" with a positive response it has received from many small companies, but the Institute of Directors said it was "deeply disturbed" by the disclosure.

Director general Simon Walker said: "The news that Premier Foods could be forcing its suppliers into controversial pay-to-stay arrangements is deeply disturbing. At a time when public faith in business is painfully low, such unacceptable behaviour puts a bullet in the chamber for those who think the heavy-hand of regulation is the only way to change the culture of corporate Britain.

"Both the Government and the Labour Party are right to be concerned. But those of us who believe in the benefits of market forces and minimal state interference should be equally furious that a few bad apples risk spoiling the whole barrel.

"A public disconnected from the gains of economic recovery, a seemingly remote corporate world acting as it pleases and a social environment that expects transparency and fair play is creating a perfect storm where hostile business practices are simply - and quite rightly - not tolerated.

"If companies continue to give politicians good cause to intervene, they cannot be surprised when regulations begin to rain down. Holding small businesses and suppliers at gun-point is a sure way to catch the attention of policymakers and regulators. Premier need to consider their arrangements closely. We encourage them to think of the long-term damage they could be doing to their suppliers, their brands, and business in general."

A Premier Foods spokesman said: "We launched our invest for growth programme in July last year as part of a broader initiative to reduce complexity in support of plans to help turn around the business.

"This included a commitment to halve the number of our suppliers and develop more strategic partnerships focused on mutual growth.

"As part of the programme, our suppliers are asked to make an annual voluntary investment to help fund our growth plans. In return, our suppliers benefit from opportunities to secure a larger slice of our current business. They also stand to gain as our business grows in the future.

"In the current challenging environment, the support of all of our suppliers is crucial. We are delighted with the positive response we have had from many who are actively engaging in building a new partnership with us, including many small companies. Indeed, many of our suppliers have seen their business grow as a result."

A Department for Business, Innovation and Skills spokesman said: "The Government has already taken action on the issue of supplier lists where it is a problem in particular sectors, for example through the Grocery Supply Code.

"We are concerned by recent reports, and are consulting to assess the evidence so we can establish what more we can do. We are also consulting on whether the biggest companies should be required to report publicly on whether businesses need to pay to be on their supplier lists."

Shadow small business minister Toby Perkins said Labour wanted to protect suppliers from "exploitative" arrangements.

"This issue of businesses charging suppliers to be on their supplier list, or changing the payment terms so that suppliers are being paid very late, is a growing problem."

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