British Steel: Almost 25,000 jobs at risk with company on verge of administration

Workers left in limbo as government yet to announce whether emergency loan has been agreed

Ben Chapman
Tuesday 21 May 2019 08:09
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Government has responsibility to bail out British Steel, says SNP's Ian Blackford

The British Steel remains in the balance, with no resolution yet emerging from crunch talks with the government over a £30m recue deal.

If additional funding cannot be secured 4,000 British Steel jobs would be put at risk along with a further 20,000 in its supply chain.

Business Secretary had been expected to issue an update on the situation after talks on Tuesday with administrators ready to take charge at British Steel on Wednesday if required.

In answer to an urgent question in the House of Commons on Tuesday, the government declined to clarify what support may or may not be in place.

"We cannot comment on details at this stage," Andrew Stephenson told the Commons, adding that the government would "continue to do whatever is within our power to support the steel sector".

Labour and the Unite union called on the government to nationalise British Steel but it is understood that that option would not be considered unless a credible private-sector buyer was in place to sell the company on to.

Steve Turner, Unite’s assistant general secretary, said: “While Unite is in continuing dialogue with British Steel and the UK government, we are very clear that if a deal cannot be struck to secure the long-term future of the steelmaker under private ownership, that the government must bring it under public control in the national interest.

“It is a national asset supporting UK plc that cannot simply be left to the market.”

Former City minister Lord Myners told the BBC's Today programme that British Steel should be put into administration and then acquired by the government.

He accused Greybull of avoiding tax through its ownership structure for British Steel which includes a Jersey-based entity that loans the company money.

"We know with British Steel its already taken large management fees out of the company, which have been paid into an offshore company, and its also lent a lot of money from offshore lenders to British Steel.

"This means that the interest payments on those related party loans are set off against the taxable profits of British Steel, whilst the interest accumulates offshore tax free."

"On that basis, I don't see why the government should be putting money in to support Greybull."

Environment minister Michael Gove said the situation was "very difficult" adding, “I’m afraid I cannot pre-empt what the business secretary may say later.”

British Steel had asked for a package of support to tackle “Brexit-related” issues, raising fears for its future.

A collapse would hit workers at British Steel’s main plant in Scunthorpe as well as sites in Cumbria, Teesside, Cumbria and North Yorkshire. Nationalisation or a management buyout are also understood to be under consideration.

British Steel's owner Greybull Capital is requesting £30m of government funding to allow it to continue, down from £75m previously.

On Tuesday Labour MP, Rachel Reeves, chair of the Commons Business Committee, accused the government of presiding over the decline of the British steel industry.

Ms Reeves pointed to: "The closure of Redcar in 2016, the lack of assurances from Greybull when they took over British Steel, the chaotic handling of Brexit and the failure to agree a sector deal which they have been crying out for."

Last week British Steel announced it had the backing of its key stakeholders and that operations would continue as normal.

It said on Thursday: “We are pleased to confirm that we have the required liquidity while we work towards a permanent solution.”

A Unite spokesperson said: “We would urge Greybull to reach a deal with the Government. Thousands of jobs depend on the outcome.

“And we will be speaking with the Government first thing in the morning.”

EU says it can't do anything to help on Brexit talks: 'London talks to London'

In a statement, the Department for Business, Energy and Industrial Strategy (BEIS) said: “As the business department, we are in regular conversation with a wide range of companies.”

Why is British Steel in trouble?

It has been struggling with falling orders from European customers which it says are linked to uncertainty around tariffs on steel after Brexit.

Steel makers have also been damaged by an escalating trade war between the US and China which has weakened

Problems go back further however. In June 2016, just weeks before the referendum, Greybull Capital bought was then part of Indian conglomerate Tata for £1.

Greybull, a London-based private equity firm which specialises in buying up companies in financial distress, claimed it would revive the company's proud history.

Sajid Javid, business secretary at the time, hailed the deal as securing a "sustainable future for world-class steel making in this country".

The unit was renamed British Steel and it has struggled ever since, prompting additional scrutiny of Greybull's role.

In September, 400 job cuts were announced to “secure a sustainable future”.

Sajid Javid meets with steelworkers in Port Talbot

Who are British Steel owners Greybull Capital?

Greybull is a private equity fund based in Knightsbridge which invests money for two rich families, the Perlhagens of Sweden who made their fortune from pharmaceuticals; and Turkey's Meyohases.

The UK government is said to be dissatisfied by Greybull's unwillingness to put up money to safeguard the future of British Steel.

If British Steel were to collapse it would add to a list of failures presided over by Greybull.

In 2017, Monarch Airlines went bust while under Greybull management, leading to more than 1,800 job losses and 85,000 repatriation flights for passengers at a cost to the taxpayer of £40.5m.

It later emerged that Greybull had struck deals with aircraft maker Boeing to insulate itself from heavy losses.

Greybull also bought Morrisons' My Local convenience store chain and Rileys snooker halls, both of which later failed.

Price hike: after Monarch Airlines collapsed in 2017, 85,000 travellers were flown home at a cost to the taxpayer of £40.5m

What might happen to British Steel workers?

GMB national officer Ross Murdoch said: “Given this latest speculation, these are understandably extremely difficult times for our members.”

“Yesterday the government, alongside trade unions and employers, signed a UK Steel Charter at Westminster. They must now put their money where their mouth is.

“GMB calls on the government and Greybull to redouble efforts to save this proud steelworks and the highly skilled jobs.”

The shadow minister for steel, Gill Furniss, called on the government to intervene, saying the UK steel industry was critical to the UK's manufacturing base and strategically important to UK industry.

“Administration would be devastating for the thousands of workers and their families who rely on this key industry in a part of the country which has not had enough support and investment from government over decades,” she said.

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