Insider Economy British Steel risks collapse with 25,000 jobs threatened

British Steel risks collapse with 25,000 jobs threatened

British Steel, the country’s second largest steel producer, is on the brink of collapse unless the government agrees to provide an emergency 30 million pound ($38 million) loan by later on Tuesday, two sources close to the situation said.

Owned by investment firm Greybull Capital, British Steel employs around 5,000 people, mostly in Scunthorpe, in the north of England, while 20,000 more depend on its supply chain.

Greybull, which specialises in trying to turn around distressed businesses, paid former owners Tata Steel a nominal one pound in 2016 for the loss-making company which they renamed British Steel.

British Steel had asked the British government for a 75 million pound loan but has since reduced its demand to 30 million pounds after Greybull agreed to put up more money, according one of the sources, who is close to the negotiations.

Greybull was also the owner of Monarch, an airline that went bust https://www.reuters.com/article/us-monarch-airlines-licence/monarch-airlines-goes-bust-spoiling-holiday-plans-for-many-britons-idUSKCN1C70FQ in October 2017.

If the loan is not approved by Tuesday afternoon, administrators EY could be appointed for British Steel as early as Wednesday, the source said.

British Steel declined to comment.

STEEL INDUSTRY SUFFERS

The second source said British Steel lost the backing of one of its four big lenders earlier on Tuesday, while some of the others had already exited.

“The (company’s) cash was not big enough to sustain even one bank pulling the plug,” he said.

The possible collapse of British Steel comes after Germany’s Thyssenkrupp and India’s Tata Steel ditched a plan earlier this month to merge their European steel assets to create the EU’s second largest steelmaker after ArcelorMittal.

The collapsed merger leaves the wider EU steel sector fragmented and vulnerable to economic downturns. It also calls into question the fate of Britain’s largest steelworks in Port Talbot, Wales, owned by Tata Steel.

British steel firms pay some of the highest green taxes in Europe, and are also saddled with high labour, energy and logistics costs, as well as uncertainties surrounding Britain’s planned exit from the European Union.

After making a profit in 2017, British Steel cut around 400 jobs last year, blaming factors such as the weak pound.

Earlier this month, it appeared to have secured the backing of lenders and shareholders to continue operating after the uncertainty around Brexit hammered its order book, with customers recoiling from the possible threat of tariffs.

The company also secured a government loan of around 120 million pounds ($154 million) at the start of the month to enable it to comply with the European Union’s Emissions Trading System (ETS) rules.

POLITICAL PRESSURE

“The UK steel industry is critical to our manufacturing base and is strategically important to UK industry. The government must intervene,” said Gill Furniss, opposition Labour’s spokeswoman for steel.

“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,” Labour said.

The second source said the British government was reluctant to hand over more cash, because Greybull could end up with the funds if the business fails.

“Greybull could walk out with millions because they secured all their loans against the assets. At the holding level, Greybull are the only creditor. The government wants Greybull out before putting money into the business,” he said.

“Its going to be difficult to survive this afternoon,” he added.

Unions demanded the government give the loan.

“They must now put their money where their mouth is,” said Ross Murdoch, national officer for the GMB union for steelworkers.

“GMB calls on the Government and Greybull to redouble efforts to save this proud steelworks and the highly skilled jobs,” Murdoch said.

Top Stories

Coronavirus: 109 new cases, two deaths on Tuesday

The Health Ministry on Tuesday announced the death of two people in Cyprus due to Covid-19. This raises the Mediterranean island’s death toll from the...

Health Minister to announce process of covid measures relaxation on Wednesday

Health Minister Constantinos Ioannou on Wednesday will announce the way the strict coronavirus measures now in effect in Cyprus will be gradually relaxed after...

Scientists in Greece find 20 million year-old petrified tree

Greek scientists on the volcanic island of Lesbos say they have found a rare fossilized tree whose branches and roots are still intact after...

Turkey bans parties at ski resorts after Covid curfew backlash

Turkey has banned music and parties at ski resorts after footage of crowded party scenes provoked anger in a country which has endured two months...

EMGF Agreement set to be ratified on Thursday

The House Foreign Affairs Committee on Tuesday decided to speed up the ratification of the Intergovernmental Agreement on the Statute of the East Mediterranean...

Taste

Squash soup

Ingredients: 1 kg pumpkin, cut into small cubes, approximately 5 cups 2 medium (400g) sweet potatoes, cut into cubes, approximately 2 ½ cups 1 chopped leek, only...

Mezedes

No visit to Cyprus is complete without enjoying the traditional meal of many small dishes known as ‘meze’. This large feast, which has been a...

Prawns with fried cheese, barley shaped pasta

Put the barley shaped pasta into a small pan with salted water, bring to a boil and when tender, drain. Peal the prawns leaving...

Salmon and shrimp sheftalies

Mix all ingredients for tabbouli in a bowl and keep to one side so flavours can combine. Prepare the sheftalies: wash and soak the casing...