How it feels to be a Tesco supplier

Contractors and consultants may be forgiven for indulging in a little bit of schadenfreude this week over the deepening troubles of one of the industry’s biggest – and toughest – clients, Tesco.

It will not have escaped their attention that this week’s humiliating £250m profit warning over accounting irregularities, appears to have at its heart the issue of how Tesco treats its suppliers.

The industry has long grumbled in private about the way the major supermarkets do business with them, with Tesco seen as among the most aggressive. In addition to being a very tough negotiator over prices in general - which Tesco, as a big spender, has every right to do – it has also in the past asked for “rebates” over work already done, on the basis that the more you shave off the price, the more work you’ll get next year.

This kind of attitude, alongside steep price cuts in the recession, has not endeared it to many, though it is not thought that Tesco’s current woes relate to its buying of construction. The reality, however, is that with the upturn in construction, Tesco’s market power to enforce its will on suppliers has been fading at the same time as its construction budget has diminished.

But the fact remains that Tesco is a hugely important customer for the industry, and the sector is best advised to work in a constructive way with it. Because if the industry can show Tesco that it doesn’t get the best results by going for lowest cost, then it will have done everyone a favour.

Joey Gardiner, Building deputy editor