CIMIC unit UGL, Greensill lashed for putting squeeze on suppliers

Greensill and construction firm UGL under fire for continuing to push small businesses to accept payment terms to up to 65 days.

Lex Greensill, founder of supply chain financier Greensill Capital.

Supply chain financier Greensill Capital and Australia’s biggest construction company are again under fire for continuing to push small business payday lending arrangements in Western Australia, despite Lex Greensill’s threat to ditch clients who use his services to squeeze smaller companies.

Documents seen by The Australian show contractor UGL, owned by construction giant CIMIC, is still pushing Greensill’s supply chain finance services to small businesses tendering for work on a resources project in the state’s Pilbara region, casting doubt on Lex Greensill’s promise to dump clients that have payment terms of longer than 30 days.

Mr Greensill said in February he would not allow his company to be used to squeeze small businesses by lengthening payment terms, and Greensill “would not do business” with companies that push out payment terms beyond 30 days.

But the documents show the UGL tender, issued in late April, specifies payment of 65 days from the end of the month the invoice is lodged, with Greensill’s services offered up if suppliers want earlier payment — in exchange for a discount on the invoiced amount.

Even the 65-day terms are a variation from UGL’s usual WA contract terms of 42 days, sources say, which is mandated by state legislation covering the broader construction industry. Because the work is for the resources sector, exempted from the WA existing legislation, UGL is able to specify longer payment terms.

UGL’s decision to stick with long payment periods flies in the face of moves by resource giants to reduce payment terms for their small business suppliers.

Mining giants such as BHP and Fortescue Metals have sped up payment times to just seven days for small businesses in order to help their smaller partners get through the coronavirus crisis, which has devastated small ­companies across the country.

On Sunday, WA Treasurer Ben Wyatt announced the state’s Finance Department would follow suit, saying it would fast-track payments of invoices under $1m to more than 2300 suppliers across the state, mandating payment within 20 days.

Mr Wyatt said the payment terms were ultimately a matter for the companies involved, but said the state government encouraged all WA businesses to pay suppliers in a timely fashion, given the difficulties faced by many in the current environment. “Improving cash flow for businesses will help them recover from the COVID-19 pandemic and support the recovery of the Western Australian economy,” he said.

“Given the difficulties faced by many businesses in Western Australia, the state government encourages all businesses to pay invoices as quickly as possible.”

Small business ombudsman Kate Carnell said she thought the terms offered by UGL and Greensill in a time of crisis was “immoral”, particularly given Mr Greensill’s earlier commitment to end the practice.

“I’m really disappointed with Greensill. They haven’t just said it once, they said it a number of times,” Ms Carnell said.

“I don’t think we ever expected them to pull the plug on contracts that had already been signed. But it’s disappointing that Greensill is still supporting companies that obviously aren’t reducing their payment times to 30 days or less. That’s really unacceptable.

“Greensill made it clear that they wouldn’t deal with companies that had standard payment times of more than 30 days and this is a new tender, I would have thought their commitment covered this,” she added.

Ms Carnell said it was particularly important that big companies followed the lead of their peers that had reduced payment times to ensure the economy recovered quickly as the coronavirus crisis recedes.

“To get the economy moving we have to increase productivity. We’ve relied on increasing population over the past number of years and that’s not going to work anymore,” she said. “So we’ve really got to focus on productivity and one of those things is faster payment times. This is always unacceptable behaviour, but at this moment I would argue it’s immoral.”

Opposition employment and industry spokesman Brendan O’Connor said he was disappointed that Greensill had gone back on their word of not doing business with companies who don’t pay their suppliers within 30 days. “Federal Labor welcomed the decision by Greensill to stop providing its supply chain financing services to companies that deliberately use it to push out 30-day payment time, and it is extremely disappointing they have not stuck to their word,” Mr O’Connor said.

“There is no pressure from the government, which has failed to act on payment times, emboldening more and more companies to exploit small businesses. Small businesses are particularly vulnerable due to COVID-19 and the government is not stepping up to the plate to support them.”

A spokesman for Greensill said the company did not discuss individual clients. “We continue to work with our clients to align them with our position on SME payment terms,” he said.

Last week, Mr Greensill, who is based in London, lost an appeal against the Australian Taxation Office over a $60m tax bill relating to the sale of shares in his supply chain financing business and other stock transferred to him from a family trust.

Finance Minister Mathias Cormann said earlier this month the government would introduce in January its Payment Times Reporting Framework, which will require large businesses with a turnover of more than $100m to report on their payment terms for small business suppliers. The government also plans to introduce a rule requiring businesses with commonwealth contracts to pay small suppliers within 20 days in September next year.