British Steel risks collapse with 25,000 jobs threatened
British Steel is the country’s second largest steel producer.
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.
Greybull was also the owner of Monarch, an airline that went bust 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.
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 EU.
After making a profit in 2017, British Steel cut around 400 jobs in 2017, 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 dollars) at the start of the month to enable it to comply with the European Union’s Emissions Trading System (ETS) rules.
“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.