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Diageo makes u-turn on supplier payments
Diageo has reconsidered a plan to lengthen its payment deadlines to suppliers after it was accused of threatening the “backbone” of the UK economy.
Earlier this we the drinks business reported Diageo’s plans to alter its contract with new suppliers, increasing the time it could take to make payment from 60 to 90 days.
Diageo sent letter to its suppliers informing them that from February 1 all new suppliers would be required to wait up to three months for payment. The company has already doubled its payment times from 30 to 60 days in 2009.
The letter explained the move would “improve its cash flow and drive out costs” and support the “long term sustainability of our business and yours.”
However the decision was criticised by the Forum of Private Business (FPB) as threatening to “break the backbone of the British economy – small businesses”. UK MP and business minister Matt Hancock said making small businesses wait an unreasonable time for payment was “entirely unacceptable”.
However on Friday Diageo said no small or medium-sized business would be asked to accept 90-day payments and could remain with a 60-day limit, as reported by The Telegraph.
The U-turn followed talks with Diageo and the Chartered Institute of Credit Management (CICM), which manages the Prompt Payment Code on behalf of the Government.
David Cutter, president of supply and procurement for Diageo said: “Diageo values its long term and collaborative relationships with its suppliers. We want to clarify that our standard supplier payment terms have not changed and no supplier would be required to move to longer payment terms in order to secure future business. We continue to take an open and flexible approach when reaching agreements with suppliers and tenders based on existing terms will continue to be accepted.”