Government showed 'unusual' interest in Greensill

The government wanted the decision over whether Greensill Capital could take part in an emergency lending scheme to be prioritised, a watchdog said.

The Department for Business (BEIS) showed an "unusual" level of interest in the finance firm's accreditation, the National Audit Office said.

A report found BEIS emailed eight times for updates on Greensill's application.

The government said there was no suggestion ministers or officials made efforts to influence the decision.

A spokesperson added department officials requested updates on Greensill's accreditation process so that it could "assess whether jobs were at risk at Liberty Steel and its supply chain".

Greensill Capital, which has since collapsed, made seven loans totalling £350m to companies owned by Sanjeev Gupta's business empire, GFG Alliance, which included Liberty Steel, the UK's third-largest steel manufacturer which employs 3,000 people.

The National Audit Office has released a report looking at the accreditation process that Greensill Capital went through, in order to gain access to government backing for its loans.

The NAO's investigation follows a lobbying row, which started when it was revealed that former prime minister David Cameron sent messages to the Chancellor's private phone to ask for help for the lender, where he worked as an adviser.

The firm was run by Lex Greensill - a former unpaid adviser to the ex-PM during his time in No 10.

At the start of the coronavirus pandemic the government said it would back loans to large companies.

Two schemes, named the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Coronavirus Business Interruption Loan Scheme (CBILS), allowed accredited lenders, such as Greensill, to provide loans of up to £50m to companies. Both schemes are administered by the government-backed British Business Bank.

The government has guaranteed 80% of the value of loans, which means that if Greensill's loans are not repaid by the borrowing companies, the government could lose almost £335m, the NAO said.

The NAO found the bank used a "streamlined version" of its accreditation process into the now-collapsed firm to "provide prompt access to finance for businesses", said Gareth Davies, head of the NAO.

"In the case of Greensill, this process did not identify the risks that materialised less than a year later when Greensill entered administration," he added.

The NAO said the bank became "concerned" that Greensill might have exceeded its lending limits in October last year, after it had made seven loans totalling £350m to companies owned by Mr Gupta's GFG Alliance.

It found six of the loans totalling £300m were made on the same day.

The report said scheme rules allowed "loans of between £50m and £200m to a business group, subject to additional accreditation of the lender and only with the bank's pre-approval".

"Greensill was not accredited for this," the report said.

During Greensill's accreditation to CLBILS in May 2020, the Bank reiterated to Greensill the scheme rules around group lending, saying that, as an illustrative example, "British Steel would be one group with a £50m limit, and it is not a £50m facility limit per subsidiary"," the NAO said.

"The [British Business] Bank raised with Greensill its concerns that Greensill's lending to the GFG Alliance borrowers exceeded the amounts permitted by the scheme rules," the report said.

It led to the bank suspending all government-backed lending by Greensill through its schemes.

Greensill has denied providing loans outside the scheme rules.

It told the British Business Bank it considered the loans to be compliant and that it had received "political steers" that its support for the steel industry was welcome, the NAO said.

However, later in March 2021 the bank suspended the government's guarantee obligations to the lender.

Mr Davies said it was "to the bank's credit" that it "quickly picked up the loans allegedly in breach of the scheme rules", but added had it applied a different accreditation process it was possible the "situation could have been avoided."

The NAO said the Department for Business (BEIS) had been "particularly interested in Greensill's accreditation" and that it told the NAO it "repeatedly requested updates on Greensill's accreditation because it knew Greensill could potentially provide support to Liberty Steel".

The NAO said the bank "demonstrated the independence of its decision-making" by rejecting requests from BEIS to prioritise Greensill in the accreditation process.

British Business Bank chief executive Catherine Lewis La Torre said the bank acknowledged that "applying a less streamlined process might have led the bank to further question Greensill's application".

"A less streamlined accreditation process would, however, have been lengthier, meaning that fewer lenders may have been accredited, and fewer businesses would have received the critical finance they needed," she added.

A BEIS spokesperson said: "There is no suggestion whatsoever that BEIS ministers or officials sought to influence the British Business Bank's decision. All decisions taken by the Bank are made independently of government in accordance with their usual procedures."

They added it was "perfectly normal - and right - that government gathers all relevant information when approached for taxpayer funds to support a business".