Unilever UK Limited and four divisions of Scotch whisky giant Diageo have been expelled from a UK government-backed code that promotes fair treatment of suppliers for not paying suppliers on time.
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 Limited, Diageo Global Supply IBC Limited, Diageo Northern Ireland Limited, Diageo Great Britain Limited and Unilever UK Limited, have been formally removed from the Prompt Payment Code (PPC) after “failing to honour” their commitments.
“All five companies have had the opportunity to voluntarily withdraw their Code membership but have not engaged with the Small Business Commissioner who runs the PPC on behalf of the Department for Business, Energy and Industrial Strategy,” said the Department for Business, Energy and Industrial Strategy (BEIS).
BEIS said the latest Payment Practice Reporting (PPR) data highlighted that:
- Diageo Scotland Limited were paying 42% of invoices within 60 days
- Diageo Global Supply IBC Limited, were paying 32% of invoices within 60 days
- Diageo Northern Ireland Limited were paying 33% of invoices within 60 days
- Diageo Great Britain Limited were paying 36% of invoices in 60 days
- Unilever UK Limited were paying 51% of invoices within 60 days
Liz Barclay, UK Small Business Commissioner, said: “It’s always disappointing when a company can no longer reach the payment standards set by the Prompt Payment Code.
“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.”
Small Business Minister Paul Scully said: “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 PPC Compliance Board, made up of Andy Chamberlain (iPSE), Mike Cherry (FSB), Elizabeth Crowhurst (CBI), Senior Civil Service representative of Business Growth Directorate in BEIS, Yvonne Gale (Chair), Suren Thiru (British Chamber of Commerce), Martin Traynor (Cabinet Office), Iain Wright (ICAEW), said: “The removal of these six companies from the Code demonstrates that we will crack down where we find that signatories are not paying suppliers on time.
“We want to see all Code signatories adhering to the commitments they’ve sign up to and to see continual improvement in payment behaviour.”
In response to its expulsion, Diageo said it is fully committed to ensuring all its suppliers are paid to terms.
“We are continually working to improve our payment practices, with an acute focus on the small-to-medium suppliers (SMEs) within our supply chain,” said Diageo.
“In the UK, we segment our suppliers into two groups: ‘small-to-medium suppliers’, with less than 250 employees (SMEs); and ‘larger suppliers’, which includes multi-national companies with larger revenues and workforces.
“All of our SME suppliers are on 60-day standard payment terms, with our larger suppliers on contracts involving different payment terms, each mutually agreed on a case-by-case basis.
“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 our SME payment data and reported as a single average figure, it does not provide an accurate picture of how we are meeting our contractual obligations.
“For example, in our January 2022 submission, 97% of our SMEs and 93% of all suppliers were paid to terms.
“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.
“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.
“Indeed, Diageo was considered compliant with the code until changes were made to remove this important exemption for larger suppliers.
“We are clear that we are honouring the commercial commitments we have agreed with our supply partners …
“While Diageo is no longer a member of the Prompt Payment Code, we will continue to work hard to ensure all our suppliers are paid to agreed terms, with an acute focus on SMEs.”