The Association for Consultancy and Engineering (ACE) has asked whether Tesco was boosting its record profits by forcing its construction suppliers, including consultancy and engineering firms, to accept draconian cuts in fees for their services.

Speaking following the announcement that Tesco had recorded annual pre-tax profits of £3.13bn, an improvement of 10% on the previous year, ACE Chief Executive Nelson Ogunshakin said: "Whilst it is heartening to see Tesco doing very well even in the current global economic environment, we are hearing from our sources in the construction sector that Tesco may be boosting those record profits by arbitrarily seeking cuts in fees of up to 40% from their construction suppliers."

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If true, Mr Ogunshakin said that such cuts would damage the sustainability of the industry.

"In the current economic climate there is obviously pressure on costs for all businesses," said Mr Ogunshakin.

"My message to any clients in the private or public sector contemplating big cuts in the fees they pay their suppliers is to get real. The supply chain is not a charitable business and in fact a reasonable supply chain should take a sensible decision and avoid working with such clients. If you make cuts in fees and compromise your position today, then you will have to do that continuously thereafter and that is no way to run any business."

(CD/JM)