Labour was today dragged into the Greensill scandal after it was revealed its shadow defence secretary John Healey lobbied ministers to hand the cash-strapped company £200million in COVID-19 loans ‘without delay’.
The shadow defence secretary wrote to Business Secretary Nadhim Zahawi in May 2020 urging him to give Greensill, run by Australian financier Lex Greensill and owners of Liberty Steel, greater access to the Coronavirus Large Business Interruption Loan Scheme [CLBILS].
Mr Healey said Liberty needed the cash and ‘their application for CLBILS remains dependent on their lender, Greensill, being accredited for the higher cap loan scheme, which I trust can now be done without delay’.
Mr Healey told the Financial Times today that he felt his letter was the right thing to do as ‘the local constituency MP’ for Liberty Steel’s Rotherham plant, just as Labour demanded a new law on political lobbying and accused the Tories of being ‘consumed by cronyism’.
He said: ‘I was doing my job for the big Rotherham plant that Liberty had recently bought and expanded’.
His involvement was revealed by Mr Sunak, who struck back yesterday via an aide who said: ‘A member of the Labour front bench was lobbying on behalf of Greensill to be accredited for the higher cap loan scheme’.
Shadow defence secretary John Healey (left) lobbied the Business Secretary Nadhim Zahawi (right) to hand Greensill £200million in COVID-19 loans ‘without delay’. He claims he was protecting jobs in his constituency
Australian financier Lex Greensill, 44, (left seen walking his dog in Cheshire on April 5) reassured staff in an internal video on February 15 of the ‘incredible strength’ of a key set of funds it held with Zurich-based Credit Suisse, just before the plug was pulled
Mr Healey told the Financial Times today that he felt his letter was the right thing to do as ‘the local constituency MP’ for Liberty Steel’s Rotherham plant
The collapse of Greensill has sent shockwaves across the City and Whitehall, dragging in David Cameron, who acted as an adviser to the firm, and raising questions about the access which Mr Greensill was given to top politicians and civil servants.
Plans to stop steel tycoon buying own plants on the cheap
Jobs fears: Sanjeev Gupta employs around 5,000 people in the UK including 3,000 at Liberty Steel
Liberty Steel boss Sanjeev Gupta will be prevented from buying back his plants at bargain prices if they go bust, under plans being drawn up by the Government.
The metals magnate’s empire has been left on the brink of collapse after its largest lender Greensill Capital, which David Cameron worked for, imploded.
He is scrambling to raise cash after ministers rejected a £170million bailout of Liberty’s parent company GFG Alliance last month.
Whitehall officials are reportedly now concerned Mr Gupta might declare his steel business insolvent and later try to repurchase it.
This is a process known as ‘phoenixing’ – which company directors are strongly advised against doing. GFG employs 5,000 people in the UK, of which 3,000 are steelworkers spread across 12 sites.
Boris Johnson has said he is ‘very hopeful’ that the Government can save Liberty and all options – including nationalisation – are on the table.
To block Mr Gupta from potentially buying back parts of Liberty, officials are considering appointing accounting firm Deloitte to handle a possible insolvency that would carve it out from the rest of the company, according to The Sunday Times.
A GFG spokesman said: ‘Liberty Steel UK is undertaking significant self-help measures… working with our customers to achieve terms that will bring in cash earlier.’
It has also put thousands of jobs across Britain’s steel industry at risk, as the GFG Alliance – a network of businesses including Liberty Steel run by tycoon Sanjeev Gupta – relied heavily on Greensill for funding.
James Murray MP, Labour’s Shadow Financial Secretary to the Treasury, responding to the Chancellor’s latest deflections over Greensill, said: ‘This is desperate stuff from the Chancellor. By trying to deflect attention from his own decisions, he’s just reminded everyone that his own department had multiple meetings with Greensill last spring.
‘The Chancellor needs to stop trying to pass the buck and start answering questions about why he opened the door to Greensill to lend through the CLBILS Covid loan scheme in the first place, putting hundreds of millions of pounds of public money at risk.
‘And he still hasn’t explained why the Treasury was planning to expand supply chain financing on his watch.’
Yesterday it emerged that the founder of Greensill Capital boasted that his firm had ‘enormous’ amounts of money to lend out just weeks before it collapsed.
Lex Greensill, an Australian banker who is now at the centre of a political storm over his ties to the establishment, reassured staff that the firm was in a strong position in a video call on February 15.
But less than a month later, administrators were appointed to the lender as it admitted it could no longer keep running.
On the video call in February, a recording of which was obtained by the Financial Times, Mr Greensill said: ‘We’ve got enormous amounts of liquidity that are available to us.’
He added that the ‘markets are very much behind us’, and that investors were becoming increasingly interested in his business.
But less than two months later, the majority of Greensill’s 1,000-plus staff in the UK were made redundant.
It specialised in supply chain financing, meaning it worked with major corporates like GFG and Vodafone to pay their suppliers quickly, in return for a fee.
Greensill was effectively lending to the companies, and would be repaid at a later date when they had more cash freed up.
Greensill then bundled up these loans and sold packages of them to investors, through major asset managers such as Credit Suisse.
Mr Greensill, 44, told staff in February: ‘One of the things that is a really important detail for us to be aware of is just the incredible strength that we’ve got in our supply chain finance funds.
‘Those funds have continued to see robust inflows – indeed we’ve actually had to slow down the inflows.’
Even Qatar’s former prime minister, Sheikh Hamad bin Jassim Al Thani, had invested in Greensill loans to the tune of £145 million, according to Bloomberg. He will now be bracing for heavy losses.
Greensill hit the rocks when it revealed that its insurer had failed to renew a vital insurance policy, and it was not able to find a replacement.
The insurance gave investors the confidence to hand Greensill money – it covered any losses which they would have suffered if any of Greensill’s borrowers had failed to repay their loan.
Pressure was growing on Boris Johnson to introduce a lobbying law last night as David Cameron faced more questions about his closeness to a controversial financier (File image)
But when this cover expired, investors such as Credit Suisse refused to give Greensill any more money to lend out.
Mr Greensill told staff on the February call that a one of its insurers, Chubb, was ‘very supportive’ of agreeing a ‘tweak’ to its policy which would give investors ‘100 per cent insurance with no gap in cover’.
He said that top staff at Greensill were doing ‘great work with our friends at [insurance broker] Marsh and with Chubb’.
But it seems that the tweak was never made, precipitating the lender’s failure just weeks later.
Now GFG, one of Greensill’s biggest customers, is teetering on the brink of collapse and has been denied a £170m Government bailout. It is also refusing to make any repayments on its loans owed to Greensill.
A bloody legal battle is expected to ensue over who should bear the losses between Greensill’s administrators, its customers such as GFG, its insurers, banks such as Credit Suisse and the end investors who ploughed money into Greensill loans.
The collapse has dragged Mr Cameron back into the public eye, after it emerged he had texted Chancellor Rishi Sunak trying to get Greensill special access to emergency Covid loans.
MPs across the House of Commons have also called for an investigation into what access Mr Greensill was given to senior politicians, after it emerged he had regular meetings with officials in Whitehall and had even helped Mr Cameron’s government form a lending scheme for NHS pharmacies.