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Whisky giant says it needs to cut costs

Drinks group Diageo criticised for delaying payments to suppliers

Johnnie WalkerDiageo, the whisky to Guinness giant, has become the latest multinational to put the squeeze on suppliers by saying it intends to take three months to pay its bills.

The company has claimed that one reason for extending the time to pay from 60 days to 90 is to support investments it is making in Scotland and Ireland.

The Forum of Private Business, which represents smaller firms,  has expressed its concern to the UK government’s Department of Business, Innovation and Skills, warning that it would impact severely on small companies.

Diageo, which makes Johnnie Walker whisky, is the latest in a growing number of big firms to extend payment terms. They include Debenhams and Halfords.

The company says in a letter seen by the FPB that  it needs to improve cash flow and drive out costs and claims such measures will support the long term sustainability of suppliers as well as itself.

“In addition, we have significant investment projects under way across our operations in Scotland and Ireland and like any business, to support our investments we need to improve our cash flow and drive out costs,” it says.

The FPB believes Diageo is making excuses to extend payment times and has criticised the company before on the same issue.

Phil Orford, chief executive of the FPB, said late payment is “hugely damaging for small businesses”.

According to the Telegraph, he is questioning Diageo’s status as a signatory to the Prompt Payment Code and will call for the company’s removal.

The paper quotes Diageo saying that it values its suppliers and looks for “open and fair relationships.”

It said the company had written to key manufacturing suppliers to make them aware that from 1 February, it is moving to a different procurement process for future tenders. It also offers a supplier financing programme which enables them to benefit from early payment.

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