It’s a trick that goes back at least as far as the Middle Ages. Say a wool merchant has a stack of unpaid invoices from tailors who buy his cloth, but no cash on hand to buy more wool. Rather than stop trading while he waits for his customers to pay up, he sells the invoices, at a small discount, to a “factor” – a banker who gives him the cash today. The merchant gets to keep trading, and the factor collects the money from the tailors and pockets the difference.
In the centuries since, factoring became part of the supply chains that grew around the world, oiled by liquidity. As these operations became faster and more complex they needed not just factoring but reverse factoring, in which people sell their debt, rather than their credit, and each agent in the chain is paid straight away. The process became computerised, and modern global trade now runs on a silent river of digitised debt.
The problem for Lex Greensill, a farmer’s son from Bundaberg, Australia, was that this business, known as supply chain finance, isn’t a huge money-spinner. So he pretended it was, selling its magic everywhere from boardrooms to trading floors to the highest echelons of British politics before his real business – extending risky, short-term loans to people other banks wouldn’t touch – was uncovered by Duncan Mavin and other journalists, and his company collapsed in March 2021, leaving billions in unpaid bills.
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The picture that emerges from Mavin’s forensic and riveting book is of a man driven by grasping insecurity. This is a personality cut from the pages of GQ, somebody obsessed by the need to have the very best in suits, air travel and business cards.
The business cards were one-and-a-half times standard size to make them stick out of a Rolodex. They were designed by Smythson of Bond Street and, like many things in Greensill’s life, they served a double purpose. Until May 2010, Smythson’s creative director was Samantha Cameron, and eventually Lex would have two sets: one for his company, Greensill Capital, and one for 10 Downing Street, where David Cameron took him on as a crown representative in 2014.
Cameron had his uses for Greensill, too. He and George Osborne knew that huge cuts to public spending would hobble Britain’s economy, but like all good ex-Buller boys they blithely assumed that their vandalism could be easily paid for. When banks remained cautious, Cameron’s government looked for new ways for businesses to borrow, and supply chain finance was made to fit the bill. Greensill went to almost every arm of government touting his financial wizardry, and with Cameron’s help he introduced it to the NHS.
On 24 June 2016 Cameron walked humming from the podium at which he had just resigned towards a new role at Greensill Capital, where he would work as a lobbyist for £29,000 a day. The two men visited Saudi Arabia’s Mohammed bin Salman in his desert retreat, and Son Masayoshi, CEO of the company with the world’s biggest technology investment funds, in Tokyo. During the pandemic, Cameron lobbied officials in government and the Bank of England to allow Greensill to offer taxpayer-backed loans to businesses.
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And yet Greensill seems drawn to disaster. He helped persuade Carillion to move its debts into its supply chain (it collapsed in 2018, owing £7bn); he extended loans to the Spanish energy giant Abengoa (it collapsed in 2021, owing €9bn); he financed an airline’s deal for Boeing 737 Max planes (the model was grounded for 20 months following two crashes). His most dangerous relationship, however, was with the metals tycoon Sanjeev Gupta, to whom he loaned $5bn.
For years, Gupta supplied much of the revenue that allowed Greensill to claim its worth to investors; prior to its collapse, Greensill sought a valuation of $7bn. But the arrangement was also Greensill’s undoing, as a series of risky bets on Gupta’s companies led the financial institutions that insured Greensill’s debt and provided its credit to withdraw their support, leaving it exposed as Gupta’s troubled business defaulted.
The question is: who will pay? Greensill keeps a low profile at his eight-bedroom Georgian vicarage in Cheshire. Cameron was cleared of unregistered lobbying. And Nadhim Zahawi, whom Gupta thanked for being “personally instrumental” in securing £400m in state-backed loans for his business, is Chancellor of the Exchequer. The cost to the taxpayer of the Greensill debacle has been estimated at up to £5bn – so the answer, as always, is you.
The Pyramid of Lies: Lex Greensill and the Billion-Dollar Scandal
Duncan Mavin
Macmillan, 352pp, £20
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This article appears in the 27 Jul 2022 issue of the New Statesman, Summer Special