Tesco investigated over late payment to suppliers

Tesco Warehouse

A British watchdog has launched an investigation into the way Tesco deals with suppliers, further highlighting the struggles faced by the retailer after allegations of accounting irregularities emerged earlier this year.

Christine Tacon, the U.K.'s Groceries Code Adjudicator (GCA), said the probe -- which is expected to take 6-9 months -- would "consider the existence and extent of practices which have resulted in delay in payments to suppliers."

Tacon said she made the decision to investigate following information submitted to her after the supermarket over-stated profit in September 2014.

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"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," Tacon said in a statement.

In a statement emailed to CNBC, Tesco said it had worked closely with the office of the GCA to identify any issues it has with the Groceries Supply Code of Practice.

"An internal review we carried out and shared with the GCA identified some areas of concern," a spokesman said. "We have taken action to strengthen compliance and, as we have announced, we are changing the way we work with suppliers. We will continue to cooperate fully with the GCA as she carries out her investigation and welcome the opportunity for our suppliers to provide direct feedback."

The GCA said that, at this point, the probe was focused solely on Tesco, but added that if evidence which indicates that the same practices have been carried out by other retailers is discovered, the scope of the investigation may be extended.

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Tesco has the biggest market share out of the U.K.'s "big four" supermarket chains, but has been under the spotlight since a financial black hole was discovered in September.

The company was forced to scrap its full-year outlook and senior executives have been suspended over the allegations that profits had been overstated by £263 million for the first half of 2014.

Meanwhile, an investigation by auditors Deloitte has found that there may have been similar accounting practices in prior reporting periods.

- By CNBC's Katrina Bishop. Matt Clinch contributed to the report.

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