Four Diageo subsidiaries are among a list of companies which have been formally removed from the Prompt Payment Code (PPC) after failing to honour their commitments.
The voluntary code requires companies to pay 95% of invoices within 30 days to their small suppliers and pay 95% of all invoices within 60 days.
Diageo Scotland, Diageo Global Supply IBC, Diageo Northern Ireland, Diageo Great Britain and Unilever UK have had the opportunity to voluntarily withdraw their code membership, but have not engaged with the Small Business Commissioner, which runs the PPC on behalf of the Department for Business, Energy and Industrial Strategy.
Latest Payment Practice Reporting (PPR) data highlighted that:
- Diageo Scotland was paying 42% of invoices within 60 days.
- Diageo Global Supply IBC was paying 32% of invoices within 60 days.
- Diageo Northern Ireland was paying 33% of invoices within 60 days.
- Diageo Great Britain was paying 36% of invoices in 60 days.
- Unilever UK was paying 51% of invoices within 60 days.
Diageo, BAE Systems, GlaxoSmithKline, Shell UK and Leonardo - all major employers in Scotland - were originally suspended in 2020.
A Diageo spokesperson responded: “While the code has changed, our commitment to ensuring all suppliers are paid on time has not.
“In our latest report, 97% of our SME suppliers and 93% of all suppliers were paid on time.
“We will continue to work hard on our payment practices, with an acute focus on SME suppliers, reflecting the original intent of the code.”
Small Business Commissioner Liz Barclay said: “It’s always disappointing when a company can no longer reach the payment standards set by the PPC.
“The code is there to make sure that suppliers get paid as quickly as possible and when firms leave or are removed there is a risk that payments to suppliers will be slower.
“We will work with the firms mentioned to get them back onto the code as quickly as possible should they wish to return, because that’s to the benefit of the suppliers and to the companies themselves.”
The UK Government set a standard of 95% of all supply chain invoices to be paid within 60 days for organisations which want to do business with government. Suppliers who do not comply with this standard could be prevented from winning government contracts.
Small Business Minister Paul Scully added: “As our small businesses recover from the pandemic, the last thing they need is for some big firms to hold back the cash that is owed to them.
“I urge the companies that have been removed from the code to get their acts together to improve their performance.”
The UK Government announced in November 2018 that from September 2019, any organisation that bids for a central government contract more than £5m a year will need to demonstrate it has effective payment systems in place to ensure a reliable supply chain.
The Small Business Commissioner is an independent public body set up under the Enterprise Act 2016 to tackle late payment and unfavourable payment practices in the private sector. The SBC covers England, Wales, Scotland and Northern Ireland.
Diageo pointed out that in the UK, it segments suppliers into two groups: small-to-medium, with less than 250 employees; and larger suppliers, which includes multi-national companies with larger revenues and workforces.
The way in which the UK Payment Practice Reporting data is consolidated on the Duty to Report platform does not allow for SME suppliers to be differentiated from larger suppliers. When the payment of our larger suppliers’ invoices is consolidated with SME payment data and reported as a single average figure, it does not provide an accurate picture of how we are meeting contractual obligations, according to a statement from Diageo.
“As the original intent of the Prompt Payment Code was a focus on SME suppliers, we firmly believe this is where our focus should be,” noted the drinks group. “When we originally joined the Prompt Payment Code, there was an exemption for longer terms with larger suppliers - this was no doubt in recognition of the commercial reality that these are standard practice for longer-term contracts agreed between larger companies.”
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