THE SUPERMARKET price war has been blamed for an 80 per cent rise over two years in the number of food and drink producers in Scotland who are facing "significant" financial distress.

The consumer's appetite for lower prices is said to be having a major effect on farmers, suppliers and small grocers with new figures showing the numbers in difficulty have risen particularly rapidly in the last year.

Restructuring firm Begbies Traynor's Red Flag Alert research said there were 115 such businesses in trouble in Scotland in the first quarter of the year.

But two years previously their survey showed there were just 64 Scots firms in similar 'significant distress' and last year that rose by 10 to 74.

Part of the pressure on food and drink producers comes from supply contracts with big purchasers, such as supermarkets, which can involve large discounts, slow payments or rebate demands.

The Red Flag distress signals used by Begbie Traynor use a comprehensive and complex methodology, drawing on factual legal and financial data including court judgements, insolvency proceedings and a credit risk scoring system that takes into account working capital, retained profits and net worth.

Allan Bowie, president of the National Farmers Union of Scotland said: "The problem is the sheer intense nature of the price war means supermarkets trying to get the customer coming through the door regardless of what is being offered.

"The issue is that the public know about this deflation so the consumer just sits back because they expect it cheaper next week.

"Now, in food because some of it is perishable it doesn't quite work that way. It has to find a home, and has to be used. So there is huge concern that the consumer is expecting a better deal and I think they are getting a very good deal currently, but there comes a point when there is an impact on small food retailers and suppliers and the competition.

"At some point the UK government and the Scottish Government have to be aware of the consequences."

Mr Bowie, 54, who himself farms over 800 acres of arable land in partnership with his son in Fife and Clackmannanshire, said cheaper imports were taking its toll on local producers.

Mr Bowie, who stopped producing vegetables and potatoes to concentrate on wheat and barley for economic reasons, said: "What we are concerned here is that actually the consumer might not have the suppliers or these producers of food in a year's time or six month's time. That's the impact.

"We have a currency differential that makes it more advantageous for European producers to export into the UK.

"We have to be just as competitive as others and keep costs under control.

"We need to ensure the consumer understands that we provide value for money, even though it is slightly more expensive. We provide increased value and it is worth paying that little bit more and seek out our produce.

Stuart Mackinnon of the Federation of Small Businesses in Scotland said it wanted the next UK government to take action to ensure smaller businesses are paid promptly and treated fairly, saying they have been campaiginng hard on the issue of late payment and supply chain bullying.

"Large businesses continue to use their might to squeeze small Scottish businesses, often delaying payment for months on end. As small firms mostly don't have the cash reserves of their larger counterparts, this can cause real financial difficulties."

James Withers, chief executive of Scotland Food and Drink, which is tasked with growing the value of the sector, said there has been more "upheaval" in the UK grocery sector than at any time in the last 20 years.