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Call for £30m bailout

Workers fear for jobs as British Steel enters insolvency

British Steel

Steel workers fear for the future of the industry


 

Thousands of steel workers were left fearing for their jobs after the High Court ordered British Steel into compulsory liquidation, and appointed the Official Receiver as liquidator.

The move follows a breakdown in rescue talks between the government and the company’s owner, Greybull.

The Official Receiver said in a statement: “The immediate priority following my appointment as liquidator of British Steel is to continue safe operation of the site.

“I appreciate that this a difficult time for the company’s employees and I want to thank them for their ongoing cooperation.

“The company in liquidation is continuing to trade and supply its customers while I consider options for the business. Staff have been paid and will continue to be employed.

“The court also appointed special managers to assist me with my work and they are engaging with staff and their representatives to keep them informed, as well as contacting British Steel’s customers.”





British Steel said Sam Woodward, Hunter Kelly and Alan Hudson of EY’s restructuring team had been appointed as special managers to assist the Official Receiver.

In a statement Greybull Capital, the private equity firm behind British Steel, said:“Having rescued the business from closure over three years ago, we have worked hard to bring this important company back on its feet. Since 2016 we have arranged a financing package of more than £500 million, appointed a new and talented management team, helped the business open up new markets and reduce costs whilst addressing long-term underinvestment.

“The turnaround of British Steel was always going to be a challenge, and yet the business overcame many difficulties, and until recently looked set for renewed prosperity.

“The Workforce, the Trade Unions and the Management team, have worked closely together in their determination to strengthen the business, however, the additional blows dealt by Brexit-related issues have proven insurmountable.

“We are grateful to all those who supported British Steel on the attempted journey to resurrect this vital part of British industry. We are now focused on assisting all involved as best we can through this process.”




Britain’s second-biggest steel maker has been hoping for a bail-out to avoid becoming what is seen as potentially the biggest casualty of the Brexit debacle.

The company is understood to have reduced its call for funding from £75 million to £30m as Labour has urged the government to nationalise the business. British Steel has already borrowed £100m just last month to pay an EU carbon bill.

The Business Secretary Greg Clark has issued a statement, saying the government will pursue every possible step to secure the company’s future.

“The Government has worked tirelessly with British Steel, its owner Greybull Capital, and lenders to explore all potential options to secure a solution for British Steel,” he said.

“We have shown our willingness to act, having already provided the company with a £120m bridging facility to enable it to meet its emissions trading compliance costs.”

Think-tank IPPR said that British Steel’s collapse would lead to £2.8bn in lost wages over 10 years and cost the government £1.1bn in lost revenue and extra benefit payments.

British Steel’s troubles have been linked to a slump in orders from European customers ‎due to uncertainty over the Brexit process.

The firm has also been struggling with the weakness of the pound since the EU referendum in June 2016 and the escalating trade US-China trade war.

Jeremy CorbynLabour leader Jeremy Corbyn, pictured, said: “The collapse of British Steel would have a devastating impact on thousands of jobs in Scunthorpe, and could have major knock on effects on wider supply chains. 

“Once again, our communities are being betrayed by a Tory government whose free market obsession is threatening Britain’s vital manufacturing base – just as they were under Margaret Thatcher.

“Britain’s proud steel industry has a major role to play in ushering in a Green Industrial Revolution, securing British manufacturing for a sustainable, green future. It needs support, not a death warrant.

“If an agreement cannot be struck with British Steel, the government must act to take a public stake in the company to secure the long term future of the steelworks and protect peoples’ livelihoods and communities.”

The impact of a potential collapse could also have a knock on effect on steel businesses in Scotland.

SNP MP Marion Fellows called on the Tory government to follow the lead of the SNP Scottish Government to step in and provide support for the steel industry and to protect the thousands of jobs that are on the line.

Speaking in the Commons, Ms Fellows said: “In stark contrast to the chaos consuming the Tories, when Scotland’s steel plants faced closure the SNP Scottish Government took decisive action to secure a new owner, and the steelworks at Dalzell and Clydebridge have reopened.

“The Scottish Government has already proven its commitment to steel after successfully securing its future in Scotland, and now we need to see action from the UK government to show that it cares about this vital industry.

Background

In 2007 India’s Tata conglomerate entered the UK steel market when it bought the Anglo-Dutch group Corus and three years later re-named the business Tata Steel Europe.

Tata subsequently sold the Scunthorpe long products division to private equity firm Greybull Capital for a nominal £1, saving more than 4,000 jobs. The company was re-branded British Steel and recently returned to profit.

The steel sector provides 31,400 jobs in the UK. There are more than 4,000 workers at the Scunthorpe site, where the company produces steel used for railways and is Network Rail’s biggest supplier.



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