The UK Government has removed its guarantees on £400m worth of loans paid out by collapsed financier Greensill Capital to companies linked to steel magnate Sanjeev Gupta.
The withdrawal comes after the state-owned British Business Bank (BBB) guaranteed the loans, given by Greensill, to companies owned by and linked to Gupta, in 2020 as part of coronavirus support packages, according to the Financial Times.
The Public Accounts Committee later said the money paid out to companies linked to GFG Alliance chief executive Gupta contravened the £50m limit on loans given to a single group.
A spokesperson for the BBB told the Financial Times that under the government’s own rules, the guarantor “may terminate guarantees if the relevant loans do not comply with certain eligibility criteria and if the lender does not act in accordance with a certain standard of care”.
The withdrawal of the BBB’s guarantees could push the cost of any losses onto other creditors, after the UK’s National Audit Office warned in 2021 that the loans could cost the taxpayer £335m.
This follows Credit Suisse informing clients that its efforts to recover billions it lent to Greensill will cost the firm around £243m.
The Swiss bank stated that it expects legal and advisory fees - plus the cost of propping up the financier’s skeleton staff - to cost more than twice its previous estimate, as it prepares for years of court battles and insurance disputes, according to the Financial Times.
Scottish Liberal Democrat economy spokesperson Willie Rennie called on the Scottish Government to set out the steps that it is taking to protect Scottish public finances and the taxpayer.
Gupta's business empire is under criminal investigation for suspected fraud and money laundering.
The Scottish Government has provide hundreds of millions of pounds of financial guarantees to GFG Alliance at Lochaber and is exposed for clean-up costs at its Lanarkshire steel mills - however it has refused to set out what steps it has taken to protect Scottish public finances.
Rennie said: “The financial arrangements between the SNP Government and the GFG alliance are mired in secrecy.
“We were promised 2,000 jobs at Lochaber in return for hundreds of millions of pounds of financial guarantees, but those jobs have not materialised.
“The SNP government’s cack-handed approach to the Lanarkshire steel mills means that we could be exposed to millions of pounds for the environmental clean-up.
“The UK Government have taken action and been open about it so why can’t the Scottish Government do likewise?”
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