According to a letter seen by the source from the FTSE 100 company to suppliers, it says that from February 1, 2015, it will extend the number of days it takes to make payments from 60 days to 90 days on all new contracts and tenders.
The Forum of Private Business (FPB), which uncovered the letter, said it was “very concerned” by Diageo’s actions and would complain to the Government. It warned such behaviour “threatens to break the backbone of the British economy – small businesses”.
Diageo joins a list of high profile companies accused of squeezing their suppliers, including Mondelez, Mars, Greencore, Debenhams and Halfords.
The company said it would provide its supply chain with access to a supplier financing programme with Santander to support businesses affected by the new terms.
However, the FPB accused Diageo of using the finance scheme as a “cover” to extend payment times. Diageo has been criticised by the FPB before after doubling payment times to 60 days in 2009.
Phil Orford, chief executive of the FPB, said: “The practice of big businesses using a supply chain finance scheme in order to extend payment terms and protect their own cash flow is a worrying trend that is spreading across sectors and industries. At a time when the economic outlook remains uncertain it is fundamentally unfair that small businesses are being used as a line of credit for larger organisations and propping up big business.
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