It was announced this week that British Steel is to enter insolvency, citing uncertainty over Brexit as a key reason behind its demise.
A minimum of 5,000 jobs could be lost, it is claimed, if a rescue plan isn’t put in place for the beleaguered British steelmaker, and there is also a risk to 20,000 jobs across the whole supply chain.
To stay afloat, the company needs a government loan of £75 million to help it address ‘Brexit-related issues’ and this comes just a few weeks after the Government lent the business £100 million to avoid falling foul of the European Union's Emissions Trading Scheme (ETS).
The Daily Telegraph talks of a ‘desperate waiting game’ as a buyer is sought, while the Independent describes British Steel as the ‘canary in the coal mine’ and argues that ‘we need to prepare now for the Brexit threat to jobs’.
As for the British Government, Andrew Stephenson MP, Minister for Business and Industry, has said that ‘no stone will be left unturned’ and that ‘the Government will do whatever is in our power’ to support and act for the steel sector. Let’s see.
Gareth Stace, director-general of UK Steel, has described Stephenson’s comments as providing a glimmer of hope for the Scunthorpe site, arguing that it provides some breathing space for the company and its employees, not to mention the wider steel sector as it provides a potential route towards ‘a stable and sustainable future’.
According to Stace, “Many of the challenges we face are not unique to the steel sector – the whole manufacturing sector is crying out for certainty over Brexit, unable at present to plan with any accuracy the trading relationship it will have with its biggest market in just five months’ time. We can only state again the need for a swift resolution to this issue and the need to avoid a no-deal scenario at all costs. Long standing issues such as uncompetitive electricity prices and business rates also continue to deter investment in UK manufacturing and action on this, as part of the Government’s Industrial Strategy should, without question, be the top priority for Government now.
Stace argues that despite the challenges faced by the sector around the world, the outlook for steel demand and consumption in the UK, and globally, is positive. “Economies around the world continue to require increasing volumes of steel and the UK sector stands ready and able to supply high quality products to meet this demand. Indeed the Government’s own study from 2017 showed an additional £4bn a year opportunity for the sector in the UK alone,” he said.
Some industry commentators are focusing on Greybull Capital, the company that bought Tata Steel’s Long Products Europe for £1 in 2016 on the pledge of investing £400 million on reviving the business and claiming it was committed to it for at least 10 years. Two years in and things are looking decidedly wobbly.
Greybull, says one commentator, has been associated with a string of bankruptcies, but is said to be financially healthy itself.
One website, leftfootforward.com, says that the British government should have been wary of Greybull, claiming that private equity ‘is the equivalent of Dracula to blood banks’. It highlighted past purchases including electrical retailer Comet, which entered administration a year after it was purchased by Greybull; and the snooker halls and sports bar business Rileys, which was acquired in 2012, but ceased trading two years later. In fact, there’s a roll call of failed businesses listed by the website. Greybull bought Monarch Airlines in 2014 and it went into administration three years later; it purchased the M Local convenience store group in 2015 from Morrisons and it was closed a year later.
UK Steel's Gareth Stace stresses that the steel industry is ‘an enduring resilient one’ that has been the bedrock of the UK’s industrial landscape for 150 years ‘since we pioneered mass steel production techniques’.
“There is no reason why this should not continue to be the case for many years to come,” Stace said.