The British construction group went into liquidation in 2018 after it could no longer service its £7bn of debt, becoming one of the biggest corporate collapses in recent British history. It had just £29m of cash at the time. Cameron had no idea he was helping create a central plank in Carillion’s later scandal.
In the midst of the crisis around Greensill Capital, the finance firm that fell into insolvency in March, the connection between Lex Greensill and Carillion has been only a footnote. But the way the outsourcer used supply chain finance to mask its mounting debts — something that helped it to continue to pay bonuses and dividends even as it veered towards collapse — can be traced back to that Cameron announcement. Cameron “absolutely pushed” the supply chain finance initiative and sent a letter to the government’s 20 biggest suppliers urging them to come to a meeting at 10 Downing Street, where they were pressed to use the scheme, according to one person close to Carillion.
The contractors wooed by Greensill Carillion never used Greensill but its finance team had several meetings with the entrepreneur, who was working as an unpaid adviser in the Cabinet Office — with his own desk and team of four civil servants. Executives had “stars in their eyes about him”, said one former employee.
Carillion’s use of supply chain finance became contentious because shortly after the scheme was launched, the company extended its maximum payment times to suppliers from 65 to 120 days — in effect forcing subcontractors to use the scheme, even if they had to pay a price. Cameron revealed a long list of companies that had agreed to use Greensill’s big wheeze, which helped larger businesses to manage payments. Some of those companies quickly realised that loans to cover suppliers’ bills would not show up in their reported debt, helping to flatter their balance sheet.
Senior executives at some of the government’s other big UK contractors were also called in to meet the entrepreneur. According to people briefed on the plans, Carillion set up its “early payment facility” — its own version of the scheme Cameron announced — after meeting with Greensill.
Outsourcers knew Greensill had the patronage of Cameron and Jeremy Heywood, then cabinet secretary, who used to work with the Australian financier at Morgan Stanley. Cameron went on to work for Greensill, lobbying ministers last year on behalf of the company. “You aren’t going to bite the hand that feeds you,” said an executive at another contractor. “There was no real threat but there was a certain pressure put on because the government was a big client,” said the head of one then FTSE 100 contractor. “I thought it was odd that Number 10 pushed the scheme as Greensill was not a government official and interest rates were low at the time.”
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