TESCO is locked in a battle with suppliers this weekend after allegedly demanding one-off cash payments and keener terms to help fund its price war with rival Asda and discount supermarkets Lidl and Aldi.

Britain’s biggest supermarket chain spent last week conducting the tense negotiations. One supplier, who refused to be named, said that during a 40-minute meeting he was handed a document with the new terms Tesco was suggesting to maintain its profit margins.

It had no Tesco heading or logo. The supplier said he had been given a deadline of November 2 to agree to the new terms. “It was aggressive to say the least,” he said.

The move follows a national TV advertising campaign in which Tesco urged cash-strapped consumers to buy its cheaper own-brand products ahead of dearer branded goods.

A spokesman for Tesco said: “Our customers are facing tough times as a result of the current economic slowdown and they are looking to Tesco to help. They expect us to continuously negotiate the very best deals on their behalf. This is what we have been doing with some of our most significant suppliers this week.”Tesco refused to comment on details of its talks with suppliers or the demands it was allegedly placing on them.

The talks come just days after Hilary Benn, the environment, food and rural affairs secretary, called on supermarket bosses to do everything in their power to help suppliers to ease pressure from the credit crisis.

The big supermarkets are already trying to block moves by the Competition Commission to create an ombudsman to regulate their relationships with suppliers. In a submission to the commission last week, Asda said it would impose an “unnecessary and counterproductive burden on the industry”.

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