British Steel collapses but will trade in administration
May 22, 2019
Troubled steel producer British Steel has been placed into administration, UK officials said on Wednesday, putting some 25,000 jobs at risk.
"The company in liquidation is continuing to trade and supply its customers while I consider options for the business. Staff have been paid and will continue to be employed," the official receiver said.
"The court also appointed Special Managers to assist me with my work and they are engaging with staff and their representatives to keep them informed, as well as contacting British Steel's customers."
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The company had earlier sought financial assistance to the tune of 30 million pounds ($38 million, €34 million) from the British government to remain afloat, but the request was rejected.
The government quickly issued a statement saying it had done all it could for the company. "I have been advised that it would be unlawful to provide a guarantee or loan to British Steel on the terms of any proposals that the company or any other party has made," said Business Secretary Greg Clark.
'Devastating news'
Owned by investment firm Greybull Capital, British Steel employs around 5,000 people, mostly in Scunthorpe, in the north of England. A further 20,000 jobs are reliant on its supply chain. All these jobs now hang in the balance. "This is devastating news for the thousands of workers," said Tim Roache, general secretary of the GMB union.
Unions had earlier called for the government to nationalize the business, but the government demurred. "Pragmatic decisions in the coming days could avert another industrial disaster," said Alasdair McDiarmid, operations director at the Community union. "In that context we do not want to see British Steel becoming a political football. The stakes in this game are too high."
The opposition Labour party also criticized the government's handling of the problem. "It is testament to the government's industrial policy vacuum, and the farce of its failed Brexit," Labour's deputy leader Tom Watson said in a tweet.
Greybull Capital, which specializes in trying to turn around distressed businesses, paid former British Steel owners Tata Steel a nominal one pound in 2016 for the loss-making company.
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Making steel profitably is particularly difficult in Britain, where steelmakers pay some of the highest green taxes and energy costs in the world and are saddled with high labor costs and business rates.
Compounding their problems is the continuing uncertainty surrounding Britain's planned departure from the European Union. "The whole manufacturing sector is crying out for certainty over Brexit, unable to plan the trading relationship it will have with its biggest market. We can only state again the need to avoid a no-deal scenario at all costs," said industry group UK Steel.
The collapse of British Steel comes after Germany's Thyssenkrupp and India's Tata Steel ditched a plan this month to merge their European steel assets to create the EU's second-largest steelmaker after ArcelorMittal.
sri/rt (Reuters, AFP, AP)