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Greensill—corruption at the heart of the system

This article is over 2 years, 11 months old
The scandal of former prime ministers joining with top civil servants to lobby the government for private sector gains grows hotter by the day. Sadie Robinson gathers what we know so far, and concludes that the problem is deeply rooted in capitalism
Issue 2751
David Cameron
David Cameron (Pic: Number 10)

It didn’t take long for Lex Greensill to worm his way to the heart of the British government. A decade ago the Australian banker claimed to have found a way for bosses and states to get around the irritation that is paying their bills.

Companies want to wait as long as they can before paying suppliers—but those suppliers want to be paid as soon as possible.

Greensill founded Greensill Capital in London in 2011 to solve the problem. Jeremy Heywood, then Downing Street permanent secretary, invited him into Downing Street the same year.

Talk grew of using “supply chain finance” to pay pharmacies for ­providing NHS prescriptions—and much, much more.

By the end of the year, Heywood had given Greensill his own team and access to any department he wanted. The next year, Greensill was given a desk in the Cabinet Office. Heywood became ­cabinet secretary.

Senior civil servants, including the government’s chief commercial officer and a Cabinet Office advisor, joined Greensill’s senior staff.

And in October 2012, then Tory prime minister David Cameron announced the government was backing supply chain finance, including the Pharmacy Earlier Payment Scheme.


Under this scheme, Greensill would pay the department of health’s pharmacy bills for a cut—allegedly speeding up the process.

Greensill revelations show how a corrupt system aids the rich
Greensill revelations show how a corrupt system aids the rich
  Read More

The scheme would see around 4,500 pharmacies get access to around £800 million in cheap finance. Cameron called it a “win-win, with large companies and small suppliers both benefiting from this innovative scheme”.

Cameron’s move came despite ­widespread opposition from officials. And with government backing, Greensill’s credibility rose, allowing it to expand.

Lex Greensill rapidly arrived at such a position of influence partly because of how politics works. It isn’t simply that there’s a “revolving door” between politics and business. It’s that the same people are involved in both, and so back each other up.

That’s why Australia’s former ­foreign minister Julie Bishop and David Cameron became highly paid Greensill advisers.

Jeremy Heywood met Greensill while working for the Morgan Stanley bank. Leaked emails from the Permanent Secretary to government officials in 2011 about supply chain finance show the cosy relationships that shape ­government policies.

“Lex and I have been working on this stuff on and off for five years,” said Heywood. “It is a huge frustration that HMG [Her Majesties’ Government] ­continues to leave free money on the table in this way.”

Later Lex Greensill was awarded a CBE. And his links to the government and to pharmacy payment system boosted his credibility further—­helping him expand and secure hundreds of ­millions of dollars in other investments.

The scandal also flows from ­neoliberal ideology. The Tories think private firms offer the most efficient way to run ­everything—whether that’s paying ­pharmacies or NHS workers’ wages.

So even when problems with Greensill emerged, top Tories continued to back it.

What Greensill Capital did

Banks have lent money to firms for centuries. But Lex Greensill said Greensill Capital offered a form of “technological disruption” that aimed at “democratising capital”.

Greensill Capital offered “reverse factoring” or “supply chain finance”. It would pay an invoice on behalf of a buyer—after taking a fee—and allow the buyer more time to pay the bill.

Greensill’s deals offered much longer repayment terms. He took the debts he owned and turned them into financial products that investors could buy.

Investments in these “funds” were sold through Credit Suisse and GAM, a Swiss asset management firm.

Big global investors put in hundreds of millions of pounds. In 2019 Lex Greensill became a billionaire after SoftBank’s Vision Fund invested £1.1 billion in Greensill Capital.

Greensill Capital also bought a bank in Germany and became a commercial lender. The business generated cash that Greensill could then lend on. Vast amounts went to billionaire tycoon Sanjeev Gupta.

This way of operating spread Greensill’s risk around. So when things went wrong, more of the system was exposed.

Toothless regulator can’t stop lobbyists’ greed

The problem is the lobbying— but also the rules on lobbying.

The ministerial code and civil service business appointment rules recommend a two-year ban on lobbying after ministers and officials leave government.

This is why David Cameron didn’t break any rules when lobbying for Greensill. Cameron started working for Greensill in 2018, but stood down as prime minister in 2016.

Secret lobbyists for rich
Secret lobbyists for rich
  Read More

Even if he had broken the rules, they aren’t enforceable anyway.

The Advisory Committee on Business Appointments (Acoba) “advises” officials and ministers on whether roles they take after leaving government comply with the rules.

But it can’t stop them from taking the jobs anyway.

A huge number of officials and government advisers aren’t even covered by the existing codes, including temporary civil servants. Out of 34,000 people who left the civil service in 2020, only 108 sought advice from Acoba about their subsequent employment.

In 2018 an MPs’ select committee called Acoba a “toothless regulator” and recommended it have more powers. This wasn’t to stop corruption, but to stop “an even greater decline in public trust in our democracy”.

The government rejected its calls.

Cameron’s government set up a statutory lobbying register in 2014. But most lobbyists don’t have to be on it.


Corruption and payments for access to politicians aren’t an aberration to the “normal” running of the system—they are the normal running of the system.

A network of big businesses spend vast amounts of money lobbying politicians to act in their interests.

Lobbyists hold meetings and “briefings” with ministers and officials and also get together over drinks and lunches to “network”.

They are tightly linked to ministers and officials. So politicians will sit on the boards of the firms that the lobbyist represents. They will move in the same circles and share acquaintances.

Lobbying is well organised corruption.

How ‘supply chain finance’ became gambling for spivs

Supply chain finance makes it easier to mask debt. The money a buyer owes to the intermediary shows up as a “trade payable” or “accounts payable”.

It doesn’t have to be disclosed. So companies can make their finances look stronger than they are.

They can also do this by calculating future profits based on estimates of the future values of goods and services.

But these are at the mercy of the market. Short-selling and other dodgy dealings can send the value of a commodity soaring, or bring it crashing down in a few hours.

Because Greensill wanted to increase profits, it also offered “future accounts receivables finance”. This means lending money to a company before it has sold something, on the promise of future payments once it does.

So Greensill lent money backed up by transactions that had never happened and might never happen.

The long term problem of declining profitability in capitalism repeatedly pushes bosses to look for easy ways to make money.


Speculative bubbles, and selling and speculating on debt are examples of these. They are inherently unstable and unsustainable.

But bosses hope to make short term profit then pass the risks on to someone else.

And the rich know that, whenever they are really in trouble, nation states will bail them out.

Greensill hasn’t exposed a strange, side issue with capitalism. It has shown how capitalism works.

Corruption is built into the system and the state’s job is to make sure the system runs in the interests of profit.

…and Greensill Capital collapsed like a pack of cards

Greensill Capital collapsed after the companies that insured its lending refused to extend policies—and the firm could find no other insurer to take it over. Less than two years before it had been valued at £2.5 billion.

It was owed £3.3 billion by businesses and had 16 offices around the world when it filed for bankruptcy.

Its lawyers had argued in court that insurers should be instructed to extend the policies, otherwise 50,000 jobs would be at risk. The judge refused.

Tokio Marine Management, the parent firm of Greensill’s insurance provider, said last July that it would no longer extend two policies.

Greensill couldn’t find another insurer. Panicked, Credit Suisse froze the Greensill funds, worth over £7 billion at the time.

Problems were clear years before.

In 2018 GAM, the asset management firm that Greensill sold funds through, suspended Tim Haywood, one of its top fund managers.

An internal investigation had raised questions about investments Haywood had made in firms linked to Sanjeev Gupta.

Lex Greensill was the middleman in the deals. In 2019, an audit in Germany found that Greensill Bank was overly exposed to Gupta’s firms. But despite the warning signs, Britain’s politicians loved up to Greensill.

The aftermath—and those that got away with the loot

Credit Suisse estimates that around £1.7 billion remains “at risk” in funds that are tied to Greensill.

It’s thought that many firms that Greensill lent to are unable to repay their debts.

It said billionaire investment tycoon Sanjeev Gupta’s GFG Alliance was “driving the valuation uncertainty in the funds”. GFG firms owe the funds nearly £1 billion.

Gupta restructured his business last year to grab more cash from the Tories’ coronavirus lending scheme—with Greensill Capital’s help.

Firms linked to Gupta grabbed hundreds of millions of pounds in loans via Greensill, which used the Coronavirus Large Business Interruption Loan Scheme (CLBIL).

Greensill was only authorised to lend £50 million to a single firm under the scheme rules. But GFG is a loose collection of different businesses. Gupta split it up further last year purely to grab more money from the loan programme.

A document outlining the changes last year was entitled “CLBIL Restructuring”.


GFG Alliance owns Liberty Steel, which employs around 3,000 workers in Britain.

GFG employs around 35,000 workers worldwide.

One vulnerable plant in France is Alvance Aluminium Poitou. It got a state-backed loan from Greensill Bank last December—but two days later the money was withdrawn.

Union member Jean-Philippe Juin said, “Mr Gupta presented himself to us as a saviour, with hopeful words and many promises.

“In the end, he turned out to be an empty shell.”

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