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Five high profile companies Diageo Scotland, Diageo Global Supply IBC, Diageo Northern Ireland, Diageo Great Britain and Unilever UK 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.
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.
Latest Payment Practice Reporting (PPR) data highlighted that:
Commenting on the measures Liz Barclay, 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.”
The Government has set a standard of 95% of all supply chain invoices to be paid within 60 days for organisations who 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 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) and Iain Wright (ICAEW)
Managing Director, Reputation & Influence at 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 have signed up to and to see continual improvement in payment behaviour.”
In response, It has been reported that Diageo has argued that the code has moved the goalposts in calculating targets. Both companies have rejected the implications of these figures on the basis that the PPC average includes payments to each group’s largest suppliers, who in many cases are themselves multinational corporations. In these circumstances, it is common that both sides have mutually agreed longer payment terms.
A spokesperson for Diageo said “When we originally joined the Prompt Payment Code, there was an exemption for longer terms with larger suppliers,” a spokeswoman for Diageo said “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.”
A Unilever spokesperson said “Previous consideration was given that Unilever prioritised its SME suppliers with payment terms of 30 days, but this consideration was removed. Whilst we are disappointed with the outcome, our focus at Unilever will continue to be paying all our suppliers on time and prioritising our SME suppliers, and this will not change.”
