British Steel collapse threatens 25,000 jobs after fund talks fail
British Steel, the UK's second-largest steel producer, has collapsed after failing to secure emergency government funding, jeopardising some 25,000 jobs, Britain's Official Receiver said yesterday.
The High Court ordered the compulsory liquidation of the company, adding its staff will continue to be employed as the liquidator oversees the continuing operation of the main site in Scunthorpe, northern England.
Owned by investment firm Greybull Capital, British Steel employs around 5,000 people, mostly in Scunthorpe, while 20,000 more depend on its supply chain.
Greybull Capital, which specialises in trying to turn around distressed businesses, said it had tried to keep British Steel alive but the challenges of Britain's looming exit from the EU proved insurmountable.
Business Minister Greg Clark said British Steel was open to new buyers, while the opposition Labour Party called on the Government to bring British Steel into public ownership.
Greybull paid Tata Steel a nominal one pound for the business three years ago. After making a profit in 2017, British Steel cut around 400 jobs last year, blaming factors such as the weak pound and uncertainties surrounding Brexit, which it said hammered its order book.
EU steel company shares are currently trading at their lowest in nearly three years, driven down by weak demand, high raw materials costs and cheap imports that can no longer reach the US due to trade tariffs.
Turning a profit in steel is especially difficult in Britain, where steelmakers pay some of the highest green taxes and energy costs in the world and are saddled with high labour costs and business rates.
Jeff Kabel, chairman emeritus of the International Steel Trade Association (ISTA), said the government was paralysed by Brexit and unable to address the steel sector's challenges.
The collapse of British Steel comes after Germany's Thyssenkrupp and India's Tata Steel ditched a plan to merge their steel assets to create the EU's second-largest steelmaker after ArcelorMittal.
That failed merger left the wider EU steel sector fragmented and vulnerable to economic downturns. It also called into question the fate of Britain's largest steelworks in Port Talbot, Wales, owned by Tata Steel.
Signs of the ripple effect of British Steel's collapse are already beginning to emerge. Hargreaves Services, a company based in Durham, England, which supplies materials handling and other services, said earlier if the steelmaker ceases to trade, this could reduce its profit before tax in the next full year by about £1.3m.
British Steel had asked the government for a £75m loan, later reducing its demand to £30m after Greybull agreed to put up more money, according to a source close to the negotiations. It had already secured a government loan of £120m this month to enable it to comply with the EU's Emissions Trading System rules.