Posted: Thu 3rd Mar 2022
Consumer goods multi-national Unilever and four entities owned by Guinness producer Diageo have been struck off the government-backed code through which large brands commit to paying their smallest suppliers within 30 days.
The five companies were permanently removed from the Prompt Payment Code (PPC) for "failing to honour their commitments".
The voluntary code requires signatories to pay 95% of invoices to small suppliers with under 50 staff within 30 days and 95% of all invoices within 60 days. The companies were given the opportunity to voluntarily withdraw but they "have not engaged" with Liz Barclay, the small business commissioner. Her office runs the PPC.
Large companies are required to report their payment times to the government and the latest data shows:
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
"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," Barclay said.
"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 previously warned big businesses that if they do not pay 95% of all supply chain invoices within 60 days they could be prevented from winning public sector 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."
Almost 3,000 companies have signed the PPC but the government says "poor payment practices are still rife" with many payments delayed well beyond the previous 60-day target for 95% of invoices.
Around £23.4bn in late invoices are owed to companies across Britain and in a report last year by Intrum on the impact of the coronavirus pandemic on prompt payments, 50% of UK businesses said they had accepted longer payment terms than they are comfortable with, as they did not want to damage client relationships.
Diageo and Unilever's response to being removed from the Prompt Payment Code
The PPC originally required signatories to pay small supplier invoices within 60 days but it was strengthened last July to 30 days.
In a statement to The Times, Unilever said it was "proud to be one of the first to sign up to the [code]. Our payment terms have not changed and it is the [code] criteria that has changed. We are committed to paying all of our suppliers fairly and on time".
Diageo said: "We have taken action, over several years, to improve payment practices and have applied an acute focus to SMEs. We are disappointed by this announcement but will continue to focus on what we believe to be the original intent and spirit of the code."
Supermarket giant Tesco left the code last June in a move that was criticised by business owners and lobby groups. However, the company said it did so because it defines supplier size based on the volume of business it does with them, rather than the number of staff, so it isn't practical to commit to changes to the code.