90 day wait for pay day takes toll on Gladstone businesses
A GLADSTONE business owner who has waited almost a year to be paid for a mining contract, has been squeezed out of the resource industry because of volatile payment terms.
The 90-day, or extended payment terms, mining giants have adopted for contracts in Queensland has forced Corfields Electrical to downsize.
Owner Ken Corfield worries his small Gladstone business won't be the last to give up on the mining industry, and look for more smaller maintenance contracts locally.
His breaking point was still being owed tens of thousands of dollars from a north Queensland miner for a contract that was initiated in October and due to be finalised last December.
He said tens of thousands of dollars still owing were being "drip fed".
Mr Corfield said taking the matter higher, or to court would be too expensive.
A report - Economic Analysis of Impacts of Extended Payment Terms - proved Mr Corfield was not alone. A survey of small Queensland businesses working in the resource industry found 43 per cent had to source alternative finance to cope with the impact of extended payment terms, and 33 per cent had more than half of their revenue in extended payment terms.
Gladstone Engineering Alliance brought the issue to light last week when they encouraged businesses to make a submission to a Federal Government inquiry into how the mining industry could support regional areas.
The inquiry, led by the Innovation, Industry, Science and Resources Committee, will look into issues that affect businesses in mining regions, including payment terms.
In GEA's joint submission with Mackay's Resource Industry Network they noted the Lytton Advisory report, that said regions would miss out on new jobs and economic benefits because of extended payment terms.
Mr Corfield partly blames extended payment terms for his business gradually reducing from 80 employees in 2015 to 25 this year.
"(Extended payment terms) have caused a small business to move away from that region of work and come into a smaller arena which means less employees and less apprentices," Mr Corfield said.
The payment terms were brought in before 2015 in response to falling commodity prices, but as prices rose, the payment terms did not return to what was once considered normal.
The Lytton Advisory report estimated that reverting back to 30-day payment terms could create hundreds of jobs, $150 million increase in wages, and $250 million in Gross Regional Product during the next five years.