Nothing better illustrates the swindling and corruption inherent in British capitalism more than the scandal behind the collapse of Greensill Capital and the threat to jobs at Liberty Steel. Greensill’s demise has lifted a curtain, and behind the apparently ‘clean’ façade of British industry, we see a rotten and crooked system.
While over five thousand jobs are under threat, in a key part of the ‘real’ economy – five thousand families’ livelihoods – what we see behind in the background is highly dubious financial wheeler-dealing and swindling with only one object in mind – making a few immensely rich people even richer. Most of this would never have come to light at all, were it not for the collapse of Greensill.
Greensill Capital was the financial backer of Sanjeev Gupta, whose sprawling international industrial empire, GFG, incudes Liberty Steel; so the collapse of Greensill has put thousands of steel jobs at risk. We can see how shaky the foundations were, underneath an important national industry, if we look at the companies concerned and how they have inveigled themselves into the body-politic.
Sanjeev Gupta’s GFG empire…and dodgy invoices
First there is Sanjeev Gupta’s global empire. It consists of a holding company, GFG Alliance, which has steel and other metal plants around the world, and is a network of interlinked companies. Altogether, it employs over 35,000 workers globally, but it is now on the brink of collapse.
The loans given by Greensill Capital to GFG, or to its subsidiary Liberty Steel, amounting to billions of pounds, were backed by invoices, supposedly for monies owed to Gupta’s companies. This process, known as ‘factoring’, means that when these bills were paid, Gupta would then have the wherewithal to repay, or potentially repay, the large sums of money owed to Greensill.
Grant Thornton, the accounting company appointed to administer the collapsed Greensill, has been trying to locate some of Greensill’s money, to recoup to its own creditors. So it has naturally been checking the ‘collateral’ issued by GFG. But on approaching companies listed as GFG debtors, as per the GFG invoices, they have found that the invoices are fake, or at least ‘disputed’.
According to the Financial Times (April 1, but no joke), “Greensill Capital’s administrator has been unable to verify invoices underpinning loans to Sanjeev Gupta, after companies listed on the documents denied that they had ever done business with the metals magnate”. One company, RPS Siegen GmbH, a German scrap metals business, “confirmed to the Financial Times that it had been approached about an outstanding invoice and said that it had not traded with Liberty Commodities.”
“Very opaque” company structure
Then there is the extremely complex nature of the GFG company structure, one in which money is easily transferred between a subsidiary in one country and a subsidiary in another. When Gupta approached the British government for a loan of around £170m to keep Liberty Steel operating, even the Johnson government refused, on the grounds that there were no guarantees that the money would stay in the UK. The “very opaque” structure of GFG, a minister said, is like putting money into a “black box“.
Why does GFG have an “opaque” structure anyway, unless it is to hide movements of cash, to shift resources so as to make one plant ‘profitable’ and other ‘unprofitable’, to garner more government loans and grants and to dodge taxes?
The question that has to be asked is if that is the nature of GFG’s company structure, why was it allowed to take over significant parts of the British steel industry in the first place? We know the answer, of course – off-shore dealings and tax-dodging are written into the DNA of the Tory government and as long as jobs are ‘guaranteed’ they will usually look the other way.
One very important element in the GFG scandal is the role of a leading Labour politician in GFG. Labour’s Carwyn Jones is on the global advisory board of GFG Alliance, which includes the Liberty Steel group. Jones, who used to be the First Minister for Wales, is still a sitting member of the Labour Party NEC.
Labour Party members will be asking what he is doing sitting on both committees at the same time. If there was a debate on the future of Liberty Steel on Labour’s NEC, they will be asking who Carwyn Jones is representing – the Labour membership of Wales, or Sanjeev Gupta?
Greensill Capital and its political links.
GFG is not the only company with political links. It has now emerged that the Greensill founder himself, Lex Greensill, used to hand out business cards when David Cameron was Prime Minister, presenting himself as a “senior adviser”, in the Prime minister’s Office,with a “high-security GSI (government secure intranet) email address”. From there, The Financial Times reports, “he lobbied Cameron successfully to introduce a supply chain finance scheme for pharmacies, which Greensill Capital ended up funding in 2018. After Cameron left politics, he was hired by Greensill as an adviser, lobbying senior ministers in early 2020.”
As the Financial Times columnist, Henry Mance, wrote (March 31), referring to Cameron, “We thought he was hiding in a shed in Oxfordshire. In fact, in early 2020, he was camping with Greensill and Crown Prince Mohammed bin Salman in Saudi Arabia. Then he was texting chancellor Rishi Sunak to ask for Greensill’s now collapsed financial group to get more coronavirus support.”
Revolving door between business and civil service tops
Naturally enough, Tory Business Secretary Kwasi Kwarteng has said that Cameron has done “nothing wrong”. By Kwasi’s standards, perhaps, Cameron’s behind-closed-doors lobbying career on behalf of big business is the norm, but by the standards of ordinary working-class people, it stinks to high heaven.
Even more questions have to be asked about Greensill’s appointment of a former top civil servant. It transpires that the former head of the British government’s procurement arm was given a nice job with Greensill, without first seeking the permission or advice from the Advisory Committee on Business Appointments (Acoba) which normally ‘monitors’ (albeit superficially) the revolving door between business and the tops of the civil service.
Greensill Capital’s new director, who had been the UK government’s chief commercial officer and was responsible for spending £40bn of taxpayers’ money, was appointed in August 2016, less than a year after leaving his civil service post. Acoba told the Financial Times that it had “no record” of any application being made on this appointment to Greensill Capital.
Nationalisation should be Labour’s demand, not just ‘an option’
Meanwhile, among all this dirty dealing and crooked business practice, the response of the Labour Front Bench to the very real threat to jobs at Liberty Steel has been dire. Jobs in a key sector of the British economy are at risk: in Rotherham, Sheffield, Scunthorpe, Newport, Hartlepool and elsewhere, where Liberty operates. Yet the Shadow Chancellor, Anneliese Dodds, has limply suggested that nationalising the company is only “an option.”
The Labour response to the threat of jobs has to be a lot more robust than that. Labour should be demanding that Liberty Steel is nationalised without compensation – on the grounds that Sanjeev Gupta has had enough of taxpayers’ money already. The books of the Liberty companies should be opened up for public scrutiny, so that it can be clearly seen where money has been streamed from one GFG subsidiary to another, and where previous government grants and guarantees have gone.
Boris Johnson’s government have apparently ear-marked up to £250m in government support for the ‘greening’ of the British steel industry, beginning in 2023, but there should be no question of that money being handed to the likes of Gupta, whose Del-boy approach to financing and company structuring offer no guarantee of keeping jobs.
The steel industry could be ‘greened’
Liberty Steel is asking for £170m. Its chief rival in the UK, Tata Steel, is asking for another £500m. If we had a Labour government, it would be helping to save the steel industry and the jobs and products in makes. It would be helping to ‘green’ the industry. But not by throwing money at super-rich tycoons, whose only aim is to become personally richer.
Steel is an important industry and one that no modern economy can do without. Yet it is possible to de-carbonise steel production, through the use of electric arc furnaces for recycling and secondary steel, and through the development of hydrogen-based blast furnaces. But these developments need investment, and the private sector will not invest. Nor can it be trusted to use government loans and grants for investment without syphoning them off somewhere else.
The central focus of Labour’s policy must be the re-nationalisation of steel, as it was in the past, and the organisation of this key industry on the basis of a democratic plan of production. Labour must above all guarantee the jobs of the workers in the industry and its supply streams. The Labour front bench must start speaking up for the interests and needs of ordinary working people, or it will suffer the consequences on May 6 and afterwards.
