British Steel enters insolvency, putting thousands of jobs at risk

Concerns of impact if ‘strategic asset’ is forced to cease operations

THOUSANDS of jobs are at risk at British Steel after rescue talks with the UK Government broke down, and the company has now entered insolvency.

British Steel directly employs around 5,000 staff, including 3,000 at its integrated steelmaking site in Scunthorpe and 800 at its construction steel site in Teesside. There are also tens of thousands at risk including contractors and those employed downstream through the supply chain.

As we go to press, British Steel’s manufacturing sites remain in operation, talks are underway to find a new buyer, and the Government is facing calls to nationalise the assets.

Competitive pressure is being exerted on the UK steel industry from a number of different directions. Doubts over Brexit, a weak pound, and relatively high electricity prices and business rates have all been blamed for putting the industry at risk. Furthermore, the performance of owner Greybull Capital is under scrutiny, with reports that the equity firm was unable or unwilling to invest more money to save the assets. Greybull Capital bought the assets from Tata Steel for just £1 (US$1.3) in 2016.

UK Business Secretary Greg Clark said the Government has worked tirelessly with the owner and lenders to save British Steel from insolvency but could go no further

In May, Greybull Capital asked the Government for £75m to keep British Steel in business, this after the Government loaned it £120m in April to cover its EU emissions liabilities. UK Business Secretary Greg Clark said the Government has worked tirelessly with the owner and lenders to save British Steel from insolvency but could go no further.

“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,” Clark said.

“In the days and weeks ahead, I will be working with the Official Receiver and a British Steel support group of management, trade unions, companies in the supply chain and local communities, to pursue remorselessly every possible step to secure the future of the valuable operations in sites at Scunthorpe, Skinningrove and on Teesside.”

Impacts on industry

There are warnings that if British Steel were allowed to fail, aside from massive job losses in local communities, the effects would ripple downstream.