Can John Lewis and Waitrose really remain partners?

Historians of unforeseen crises talk about ‘chaos theory’ and the ‘butterfly effect’, in which a small perturbation far away — the flapping of a butterfly’s wings in Australia, as it were — have impacts across much larger connected systems. More usually applied to weather events, the theory had its 2008 moment when the collapse of AIG, a US insurer whose name meant little over here, threatened to cripple so many banks that, without immediate bailouts, our high street ATMs (we were told) might have been switched off there and then. Let’s hope Greensill Capital, a little-known ‘shadow bank’ created by former Queensland sugar farmer Lex Greensill, doesn’t turn out to be a giant mutant butterfly: its collapse certainly has the makings of a huge story.

In summary: Greensill was in the unregulated business of ‘supply chain financing’ — short-term credit that assists companies to pay suppliers, though it’s also accused of encouraging large companies to pay small suppliers late and to obfuscate their true debts. Greensill grew its lending to $140 billion a year, raising funding via institutions such as Credit Suisse and covering risks by insurance from the likes of Tokio Marine of Japan. Its biggest client, owing $4 billion, was GFG — the combined interests of entrepreneur Sanjeev Gupta, who was hailed as an industrial hero when he bought several of Tata Steel’s threatened UK plants in 2017.

But cancellation of Tokio Marine’s insurance cover this month forced Greensill into the hands of administrators. Credit Suisse warned that it expects to take a hit, while thousands of jobs are said to be at risk in GFG’s UK and Australian operations. The Sunday Times is all over what it calls the ‘tangled web’ of Gupta’s political connections, and the story will run on. Most importantly, scholars of financial history are wondering what systemic damage might follow a withdrawal of investor support from a global shadow banking sector in which Greensill was just one ambitious player — and whose full scale and risk profile are unknown.