Greensill’s foothold with Government
The narrative surrounding the implosion at the Aussie-domiciled supply chain finance group Greensill becomes more complex by the day.
An important strand is how the group’s founder Lex Greensill was able to establish a foothold at the heart of the Government.
A probe by the FT shows that the Greensill access came via the late former head of the civil service Jeremy Heywood.
As a civil servant who spent four years as joint head of banking at Morgan Stanley from 2003 to 2007, Heywood was passionate about introducing private sector skills into the heart of government. I remember being invited to meet Heywood for tea at a Morgan Stanley town house in Mayfair. He extolled the virtues of how privatisation of untouched parts of government and the skills of the wealth-creating sector could unlock great value for Whitehall.
Heywood, who was a colleague of Lex Greensill in the City, saw the supply chain credit model, an update on traditional bank-led factoring, the financing of invoices, as a way in which government could get more value for money out of its procurement. It was with this in mind that Heywood welcomed his younger, innovative protege Greensill into the inner corridors of Whitehall. As one of Downing Street’s great fixers, a calming influence and problem solver for a series of prime ministers, Heywood’s judgement was rarely questioned. He was particularly good at bringing government and the private sector together.
A glance at the published log of expenses submitted by Cabinet Office senior officials in 2016 shows Heywood as an inveterate entertainer of big business, including HSBC, Sage, Softbank, BAE Systems, EDF, Airbus and many more.
Since Heywood’s premature death – followed by a memorial service attended by four former prime ministers – his legacy largely has been unquestioned. But among the consequences of his enthusiasm for unfettered open markets was to lay down a welcome mat for overseas predators on Downing Street.
Heywood was an advocate of the £28bn proposed merger between Britain’s top aerospace and defence giant BAE Systems and then Airbus owner EADS in 2012. The deal, strongly opposed by this paper, eventually failed because of the intervention of the then influential fund manager Neil Woodford and Angela Merkel. The German chancellor feared the closure of manufacturing facilities in her country.
It was Heywood who enthusiastically invited Softbank chief Masayoshi Son to Downing Street in the summer of 2016 to help smooth the political passage of the £23.4bn purchase of Britain’s premier technology company, Arm Holdings. The deal was seen by Theresa May’s newly-formed government as a signal that Britain was still open for business after the shock referendum result in June.
In what potentially could have been the most calamitous deal of the early 21st century, Heywood also found himself in the middle of Pfizer’s attempt to buy Astrazeneca in 2014. After then chancellor George Osborne embraced the deal, it fell to Heywood and Downing Street to make it politically possible. Rather than saying a bid for a life sciences pioneer was a no-go area for the British government, if fell to Heywood to try to make Pfizer as soft and cuddly as possible. He sought pledges about preserving jobs at existing Pfizer factories in the UK. Heywood and the Government had not reckoned with the fierce defence of AZ’s independence by chief executive Pascal Soriot, and a fearsomely robust board.
The Greensill connection to Whitehall cannot be regarded as a positive Heywood legacy. The mandarin’s embrace of overseas takeovers, even with the best of intentions, should be regarded also as an error of judgment.
As alarming as the rush of private equity takeovers of British quoted firms is the feebleness of the response of the independent directors.
The latest chairman to throw in the towel is Ken Hanna at Aggreko which is selling out to TDR Capital and I Squared Capital for £2.3billion without even a pretence of putting up a fight. At least the directors of the world’s largest security firm G4S had the gumption to get an auction going.
It cannot be good for investors, the workforce or the broader public interest to sellout the grandiloquently described ‘world-leading provider of mobile modular power, temperature control and energy services’ at a bargain price in the middle of a pandemic.
It is an act of foolishness and cowardice.