Steel industry British Steel enters insolvency after rescue talks with government fail
Steelmaker directly employs 5,000 people and thousands more in the supply chain
British Steel has entered insolvency, putting 5,000 jobs directly at risk and endangering thousands more in the supply chain after talks with the UK government failed to reach an agreement on emergency funding.
The business secretary, Greg Clark, issued a statement on Wednesday following confirmation that the court has granted an application by the directors of British Steel to enter an insolvency process.
Control of the company will pass to the official receiver – an employee of the Insolvency Service – who will run a compulsory liquidation. EY has been lined up to assist with the liquidation.
Clark said: “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.”
Clark said the government had been willing to act, following a previous loan, but was not able to agree terms with Greybull.
He said: “The Government can only act within the law, which requires any financial support to a steel company to be on a commercial basis. I have been advised that it would be unlawful to provide a guarantee or loan on the terms of any proposals that the company or any other party has made.”
The UK’s second-largest steelmaker had sought £30m in government support after its private equity owner Greybull Capital and lenders agreed to inject £30m. The company had initially sought £75m from the government.
The collapse of the company, which blamed its woes partly on Brexit-related uncertainty, will add to pressure on the government in the run-up to the European parliament elections on Thursday.
Greybull Capital bought the business from Indian-owned Tata Steel in June 2016 and within a year appeared to have completed a rapid turnaround as it reached profitability.
Unite’s assistant general secretary Steve Turner said: “We are clear that the government must now step up and step in and bring British Steel into public ownership until a buyer can be found to avoid an economic and industrial catastrophe.
“While Greybull cannot be allowed to walk away scot-free and must be held to account for its stewardship of Britain’s second-largest steelmaker, ministers cannot wash their hands of the Brexit farce and ongoing uncertainty that has placed the company in difficulty, nor allow a business of such strategic importance to UK plc to disappear like the steelworks of SSI several years ago.”
However, it has struggled more recently, with prolonged Brexit uncertainty resulting in it losing 25% of orders at its Scunthorpe plant, adding to the problems already facing the UK steel industry, including higher energy costs than rival countries and a weaker pound, which made raw material imports more expensive.
- Share on Facebook
- Share on Twitter
- Share via Email
- Share on LinkedIn
- Share on Pinterest
- Share on WhatsApp
- Share on Messenger