Collapse of steelmaker threatens 1,300 jobs

The South Wales steel industry suffered another devastating blow yesterday after ASW, the UK's second biggest steelmaker, called in the receivers, putting 1,300 jobs at risk.

Ministers from Tony Blair down said they regretted the announcement but cautioned that there was little the Government or the Welsh Assembly could do because of strict EU rules on state aid.

ASW, which employs 1,000 workers in Cardiff, 300 at Sheerness in Kent and a further 30 in Belfast, called in receivers from KPMG after its banks failed to agree a deal with its credit insurers to keep the business going.

Graham Mackenzie, chief executive, blamed ASW's plight on the continued strength of the pound, a rise in raw material prices, the surge in cheap East European imports and US trade sanctions.

The collapse of ASW comes just days after steelmaking ended at the tin plate works of Corus in Ebbw Vale. Corus has already ceased steelmaking at the nearby Llanwern plant as part of a series of cutbacks announced 18 months ago which involved 6,000 job losses – 3,000 of them in South Wales.

Pressed on the announcement, Mr Blair told the Commons that the Government would do "everything we can" to help those steelworkers who could lose their jobs.

But Andrew Davies, Economic Development Minister in the Welsh Assembly, cautioned that there was little that could be done to avert the closure of ASW if a buyer was not found. "Help is very limited, to be honest, given the rules under state aid and the European steel and coal community rules. It is very limited in terms of any direct financial assistance," he said.

ASW shares were suspended on the London Stock Exchange at 2.5p. The group was formed 20 years ago from the merger of British Steel and GKN's interests in wire rod and steel products for the construction industry. Last year the company's sales fell to £270m – down by more than a third on the £435m achieved the year before.