Major pub and restaurant groups are not squeezing their suppliers in a bid to improve their cash flows, an analysis from Lavender Bank Partners reveals.

Analysts examined 25,000 published payment practice reports filed at Companies House for pre- and post-pandemic periods.

The analysis found most major groups performing at similar levels for paying, and some significantly improving on pre-pandemic levels.

Lavender reports 65% of its sector sample paid 95% of their invoices within the Prompt Payment Code (PPC) target of 60 days, compared to 52% in 2019.

Those maintaining exemplary standards were M&B, Nando’s, Young’s, Amber Taverns & Five Guys.

M&B paid 92% of its invoices within 30 days, while Nando’s paid 90% of invoices paid within 30 days.

Those demonstrating notable improvements were Fuller’s, JD Wetherspoon & Frederic Robinson.

Loungers was singled out as having room for improvement in its payment practices.

The all-day operator has gone from paying 65% within 60 days to 72%, but average days to pay has deteriorated, rising by 26%, from 58.0 to 73.5.

“Some of Loungers stats have marginally improved, but are still unacceptable in our view”, the Geof Collyer writes in the Lavender note . “It is the worst payer in our sample by some distance. For example, it takes four times as long to pay its invoices compared to M&B, more than twice as long, compared to Young’s or JD Wetherspoon, and twice as long as the average of our sample; and Loungers has 29% of invoices paid outside the 60-day target compared to our sample average of 6%.

“On balance, we view the Loungers’ performance as having deteriorated from pre-Pandemic, when it was also the worst performer on our analysis, alongside BrewDog, which has stopped filing payment data, along with four other groups from our 2019 sample.”

Despite 94% of sector invoices are being paid within the PPC guidelines, only Ei Group has admitted to signing up to the PPC in its filings.

Paying suppliers on time is good business practice, according to Lavender.

“Most businesses that go bust do so because they have run out of cash, not necessarily because they are bad businesses, (though the Venn diagrams will have a decent overlap),” Collyer writes. “Late  payment is often a major cause. Not paying them on time is a way of annoying your suppliers, squeezing their working capital, by temporarily improving your own cash flow and working capital.

“For an industry like the Pub & Restaurant sector that operates mostly off negative working capital, late payment shouldn’t really ever be an issue if you are a competent company. The groups in the sector generally get cash through the tills way before they have to pay their suppliers, therefore compliance with the PPC should be an easy tick in their ESG checklists.

“The Prompt Payment Code was introduced by the government in December 2008 to encourage better practice for payments of suppliers. Although welcomed by the thousands of SMEs that experience severe administrative and financial burdens simply because they are not paid on time, it was something of an ironic move, in our view, given that HMG and Local Authorities are seen as notoriously bad at paying on time. The requirement to file is legal; however, adherence to the PPC is voluntary.

“When we last reviewed this topic before the pandemic, we tracked 31 groups in the Pubs & Restaurants sector who had filed data with Companies House. On returning to the subject this week, five have dropped out. We can understand the reasons why four have done so (CVA or shrunk significantly) The reasons for the other one no longer reporting are unclear.”

The Prompt Payment Code (PPC), part of the Small Business, Enterprise & Employment Act 2015, introduced a duty on the UK’s largest companies to broadly report on a half-yearly basis on their payment practices, policies and performance.

The PPC is a voluntary code of practice for businesses, administered by the Office of the Small Business Commissioner (OSBC) on behalf of Department for Business, Energy & Industrial Strategy (DBE&IS).

Signatories undertake to a) pay suppliers on time, within agreed terms; b) give clear guidance to suppliers on terms, dispute resolution and prompt notification of late payment; and c) support good practice throughout their supply chain by encouraging adoption of the Code.

Five groups that recorded data pre-Pandemic have dropped out of the system since 2020: Azzurri Group, Revolution Bars Group and Deltic, which all undergone restructures, as well as S.A. Brain, which has sold off most of its operations.

“BrewDog is the unexplained odd one out. We don’t know why they have stopped filing.”

For more information on the note, contact geof.collyer@lavenderbankpartners.co.uk