The supermarket's Christmas period sales were up 9.3% © Nathan Stirk/Getty Images
The supermarket's Christmas period sales were up 9.3% © Nathan Stirk/Getty Images

Morrisons' Covid payment terms for small suppliers 'cost' £60m

posted by Charlie Hart
5 January 2021

Extending a scheme to provide immediate payment times for small suppliers had increased Morrisons year-end net debt by £60m, according to the supermarket’s latest results. 

Morrisons announced the scheme last year to support 3,000 of its small suppliers and farmers to improve cash flow throughout the pandemic. 

As part of the measures, the supermarket reclassified its “small suppliers” from those with up to £100,000 of business each year with the retailer, to those with up to £1m of business.

In its Christmas trading statement, Morrisons said it expected its year-end net debt to be around £1.7bn. Debt had been affected by the extension of its scheme to pay suppliers immediately during the pandemic, which the supermarket said had increased debt by £60m. 

Morrisons said it had experienced strong sales over the Christmas and New Year period, improving by 9.3% compared to last year. 

The supermarket said the significant operational gearing had offset “both the extra Covid-19 costs and other profit impacts”, which had increased as a result of a national tier system put in place in England in December to limit the spread of coronavirus.

Morrisons also said there had been investment in higher levels of stock availability during Covid-19 and in preparations for Brexit, which had increased year-end net debt by £65m, but added it expected “the Brexit and smaller suppliers impacts to reverse during quarter one 2021-22”.

David Potts, chief executive at Morrisons, said: “We will carry on listening, responding and growing, and take all the positive learnings and momentum of the most challenging of years into what we believe will be a better 2021 for all.

“I would like once again to thank everyone at Morrisons for their hard work, dedication and resourcefulness under the most testing and extreme conditions, which has been inspirational even beyond this business and the stakeholders we serve.”

Meanwhile, Aldi said it would be extending immediate payment terms for small suppliers, brought in during the pandemic, until the end of 2021.

The commitment means that the supermarket will continue to process payments for suppliers with an annual turnover of less than £1m with Aldi as soon as they are submitted. The move will impact 1,000 small British businesses in the supermarket’s supply chain.

Aldi has also announced plans to spend an additional £3.5bn with British suppliers by 2025, as part of plans for a “rapid expansion” in the UK. 

The supermarket is investing £500m in “new and upgraded stores, distribution centres and its supply chain in 2021”.

Giles Hurley, CEO at Aldi UK, said: “We are expecting significant sales growth in 2021 as we open new stores and bring Aldi to more locations across the UK. With the vast majority of our grocery products now coming from British suppliers, our growth will lead to additional jobs and investment in our UK supply chain.”

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