Struggling food manufacturer Premier Foods has come under fire for demanding its suppliers pay an annual fee to remain on the company's books.

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On Friday, the Federation of Small Businesses said the food manufacturing giant's practices "could cripple small businesses."

In July, Premier Foods saw its half-yearly pre-tax losses more than triple, ballooning from £15.7m to £54.9m and in October the company issued a profit warning.

On Thursday night, BBC Newsnight revealed its team had seen a letter, dated 18 November, sent by chief executive Gavin Darby to Premier Foods' suppliers. In the letter Darby wrote, "We are aiming to work with a smaller number of strategic suppliers in the future that can better support and invest in our growth ideas… We will now require you to make an investment payment to support our growth."

In response to a query from a supplier, also seen by the BBC, another member of Premier Foods' staff said, "We are looking to obtain an investment payment from our entire supply base and unfortunately those who do not participate will be nominated for de-list."

One supplier to the company likened the strategy to "blackmail".

According to the Federation of Small Businesses, the payment demanded by Premier would not necessarily guarantee any future contracts for suppliers. Premier Foods has said it plans to consolidate its supply base, halving the number of its suppliers.

The Federation also said it is unclear how the payments have been calculated. One small business in the South West was asked to handover almost two thousand pounds (£1,700) to secure the chance for future business with the manufacturer.

FSB chair John Allan said on Friday that the Federation has been concerned about deteriorating payment practices in the supply chain for a long time, adding that although not the first company to attempt to force suppliers to make such payments, Premier Foods is the first to make such an explicit link between payment and inclusion on supplier lists, and to indicate that payments are to become an annual event rather than a one off.

Mr Allan continued, "Premier Foods should be ashamed of themselves. Driving a hard bargain with your suppliers is one thing, but demanding a cash gift under the threat of delisting, is downright unfair. The deterioration of payment practices is an anchor dragging on the potential of small and medium businesses to grow and take on new staff.

"Too many [small] firms are waiting months for the money they are owed, and this has knock-on on their own supply chains. If the questionable practice being attempted by the likes of Premier Foods becomes the accepted norm, it may well sink those small firms without the cash reserve to prop up their larger customers."

In response to the backlash, Premier has said the requested 'investment payments' are voluntary, and that suppliers that don't pay will not necessarily be blacklisted.  

Meanwhile, industry paper the Grocer has said it uncovered evidence of similar demands being made by the Company, which owns a number of brands including Mr Kipling and Hovis, as early as July 2013.

FSB chair John Allen said the scandal highlighted the "golden opportunity" the government has to tackle 'exploitative' practices of some big businesses  through the small business enterprise and employment bill, currently passing through the House of Lords. Allen said the government ought "to take a firmer stance on payment practices [and] to toughen up the prompt payment code."