Britain’s state-owned business bank launched an investigation into Greensill Capital, and loans it extended to Sanjeev Gupta’s steel empire, months before the lender collapsed into administration, the Guardian has learned.
The news comes as former prime minister David Cameron was cleared of any potential breach of lobbying rules linked to his efforts to personally influence officials in Whitehall on Greensill’s behalf.
The British Business Bank (BBB) ordered an investigation into the supply chain finance firm in the autumn, shortly after approving Greensill as an accredited lender that could hand out emergency Covid loans to struggling firms in June.
It suggests officials were raising red flags internally about Greensill’s lending practices months before its financial troubles started making national headlines in early March.
The BBB’s own inquiry centres on the way Greensill used the 80% government-backed Coronavirus large business interruption scheme (CLBILS) to lend tens of millions of pounds to Gupta’s GFG Alliance.
Concerns first emerged about Greensill’s involvement in the scheme in October 2020 when the FT reported it had provided tens of millions of pounds worth of government-backed loans to two of Gupta’s companies, which employed just 11 people. Since then, it has emerged that Greensill loaned firms connected to Gupta an estimated £400m.
External law firms have been drafted in to aid the BBB’s investigation, which is still ongoing, according to a source with knowledge of the matter. The question of who will be left responsible if wrongdoing is discovered has been complicated by Greensill’s collapse earlier this month.
A separate audit is underway, involving all lenders accredited for the CLBILS, a sister scheme which lends to small and medium-size enterprises, and 100% state-backed bounce-back loans scheme. However, that review – conducted by KPMG – was planned and separate to the Greensill investigation.
The British Business Bank did not confirm or deny the investigation was underway. A spokeswoman said: “All accredited lenders are subject to audit by the British Business Bank to ensure their compliance with scheme rules.
“If serious non-compliance is identified, the bank is entitled to take remedial action. Such action might include termination of the guarantee agreement or withdrawal of the guarantee. It would not be appropriate to comment on individual cases given commercial sensitivities.”
The shadow chancellor, Anneliese Dodds, said it raised “serious and urgent” questions about the process that led to Greensill Capital’s accreditation for the emergency Covid loans programme in the first place.
“The chancellor and the Treasury have ultimate responsibility for ensuring public money lent through the CLBILS and other Covid-loan schemes was managed appropriately and delivered value for money for the UK taxpayer.
“We need a full, transparent and thorough investigation into the decision to accredit Greensill Capital to the CLBILS scheme. The public deserve answers.”
Greensill administrators at Grant Thornton declined to comment. A spokesperson for GFG Alliance also declined to comment.
Cameron, who was a shareholder in Greensill, was cleared on Friday of any potential breach of lobbying rules. The registrar in charge of enforcing lobbying laws launched the investigation on Tuesday, after it emerged that the former prime minister contacted the chancellor, Rishi Sunak, on his private phone last April while working as an adviser for the lender.
UK rules require people who directly lobby ministers or senior officials on behalf of a third party to declare their efforts on an official government register for lobbyists. Breaching those rules can result in fines of up to £7,500 and in severe cases even criminal charges.
However, the short-lived investigation concluded that Cameron had not been in breach of the rules.
“Based on detailed information and assurances provided, Mr Cameron’s activities do not fall within the criteria that require registration on the Register of Consultant Lobbyists,” the investigation summary explained.
Lib Dem leader and business secretary Vince Cable told the Guardian earlier this week that while Cameron has done nothing wrong, the lobbying rules should be strengthened.
“Cameron has done nothing improper. But the rules should be tightened up so that people cannot lobby for commercial interests in areas where they have had ministerial responsibility once they leave office, which is a pretty wide area for ex-PMs. Also, there is a strong case for a register of interests to be more transparent.”
David Cameron’s office declined to comment.