British Steel bids for £100m Government loan as Brexit delay dashes carbon trade
By Scunthorpe Telegraph | Posted: 15 Apr 2019
British Steel is seeking an urgent £100 million loan from the Government after it was left frozen out of a European Union-wide carbon trading scheme, according to reports.
The failure of the Government to pass a Brexit deal has been blamed for an EU decision not to allocate companies based in the UK their usual permits under the system, which supports emission-intensive industries.
According to Sky News, the company is facing a cash-flow shortfall and is in talks with Whitehall officials over the emergency funding, which it is said to be looking to secure within weeks.
But the broadcaster says its sources have confirmed British Steel's Scunthorpe works is not under threat as a result of the issue, amid speculation ministers had been warned the site could face closure.
Under the carbon emissions trading scheme, industrial polluters can use their allocation to pay for the previous year's emissions.
Companies should have been awarded their permits last month but British companies have been frozen out from this year's allocation, covering more than £2 billion of allowances, of which British Steel is said to account for around five per cent.
The Scunthorpe-based steel giant is understood by Sky News to have already utilised last year's payments to fund working capital requirements and has been left unable to pay for the latest round of carbon credits.
And the issue is thought to have been exacerbated by the past week's six-month extension to Brexit, as the UK would continue to be excluded from the emissions trading system without an imminent deal being approved by the House of Commons.
Talks between the company and the Government, led by the Department for Business, Energy and Industrial Strategy, are said to have been going on for several weeks and professional services firm KPMG is understood to have been brought in to advise ministers.
Sky News said a source close to the discussions had dismissed speculation that the funding issue could lead to an uncertain future for the Scunthorpe works.
The source was quoted as saying: "There is no scenario where this creates uncertainty over Scunthorpe."
Other energy and emission intensive companies may well be affected, with refineries, power stations and major manufacturers part of the scheme, brought in to ease he burden of environmental regulations on essential industrial processes.
Being Brexit-relates, it has immediately been politicised. For one local MP, the news is proof that Britain should accept Theresa May's deal and leave the EU. For another, it shows the dangers of leaving in the first place.
For Scunthorpe's Nic Dakin, it was a warning about crashing out.
The Labour MP said: "It reflects the dangers for our area of leaving the EU without a good deal. And underlines why it is so important to avoid a no deal exit from the EU.
"Some people on social media are suggesting that this shows the dangers of being in the EU. Nothing could be further from the truth. It's a consequence of leaving on no deal.
"What's important is that we get a good deal to leave the EU which supports our steel industry, that people understand the consequences of leaving without a deal, and that the Government do all they can to support our area's biggest employer."
Left, Scunthorpe MP Nic Dakin and right, the Brigg and Goole MP, Andrew Percy.
For Conservative representative Andrew Percy, who has consistently voted in favour of the Prime Minister's deal, British Steel's predicament showed the need to accept it.
"British Steel were very clear with local MPs that they wanted us to support the PM's deal which would have seen us leave the EU on March 29 had it passed," the Brigg and Goole MP said.
"They were clear that the deal would give British Steel certainty it needed. This was one of the reasons I supported the deal. Sadly, local Labour MPs opposed that, and pretty much every other way of leaving the EU, which has directly led to British Steel asking for this funding.
"One of the main reasons I have been prepared to accept a number of different routes for leaving the EU, even though not all of them satisfy my own beliefs, is because local jobs and businesses require certainty."
Both MPs said they were doing all they could to support British Steel.
British Steel was created in June 2016 when investment house Greybull Capital, a troubled-turnaround specialist - bought what was Tata Steel's Long Products Europe division.
It broke even in its first year and has reported positive earnings in each year since then.
British Steel employs around 5,000 people directly and its supply chain is responsible for a further 20,000 jobs. It is the largest supplier of steel rails to Network Rail and has won several large contracts for rail over the last year, in the UK and abroad.
The company has just appointed a new chief executive after a 15-month search, with chief financial officer Gerald Reichmann taking over the role, while the Scunthorpe site has been shortlisted as a potential logistics hub for Heathrow Airport expansion construction work.
A British Steel spokesman told Sky News: "Brexit is presenting a range of challenges to every British company and we are not immune.
"We are discussing the impact of Brexit on our business with ministers and officials from the Department for Business, Energy and Industrial Strategy and they have been extremely responsive and supportive to date."