17 September 2021

Diageo working to improve pay practices

United Kingdom | Prompt payment (or rather the lack of it) is a hot topic in all industries, so much so that the UK government set up its “hall of shame”, aka its Prompt Payment Code (PPC) in 2008. On 1 November 2019, Johnnie Walker owner Diageo was among 20 companies to be suspended from the PPC, since it failed to comply with the Code’s terms of payment. Businesses signed up to the voluntary Code pledged to pay 95 percent of all supplier invoices within 60 days. Recently, the rules were tightened. As of 1 July 2021, signatories to PPC are obliged to pay small firms within 30 days.

That may be the reason why, two years later, in August 2021, Diageo is still not back among the signatories. However, the firm said it was “very focused” on improving its payment practices, according to the website thespiritsbusiness.com.

The Office of the Small Business Commissioner, which manages the Code, was quoted as saying: “We can confirm that Diageo [and Unilever] were suspended from the Prompt Payment Code in November 2019, following their reported payment data reflecting that they had not met the Code’s requirements. We would need to see an improvement in their payment practices for them to be reinstated to the Code. We are actively engaging with both companies concerning their continued association with the Code.”

So much work

Tugging a proverbial forelock, a Diageo spokesperson said: “All SMEs working for us in the UK are on 60-day payment terms and 97.7 percent are currently paid to terms. Larger suppliers are often on multi-year contracts involving mutually agreed payment terms.”

Yet, there was no mention of the new 30-day payment term. Looks like Diageo will need to work harder to be reinstated to the PPC.

Per the UK government, almost 3000 companies had signed up to the Code by January 2021, but poor payment practices were still rife. In January this year, GBP 23.4 billion worth of late invoices were owed to firms across Britain, impacting on businesses’ cash flow and ultimate survival. This prompted the government to slash the payment period to small businesses in half to 30 days, with commitments to be made personally by CEOs or Finance Directors.

Brauwelt International Newsletter

Newsletter archive and information

Mandatory field