Reports British Steel on verge of collapse as Brexit uncertainty bites
By Scunthorpe Telegraph | Posted: 15 May 2019
British Steel is engaged in urgent talks with the Government and lenders to secure loans to continue production.
Reports suggest it is at risk of collapsing with the loss of thousands of jobs, the majority in Scunthorpe.
The Government is said to be preparing to intervene over fears the company could go to the wall unless it receives an emergency cash bailout, with ongoing Brexit uncertainty blamed.
British Steel is reported to be trying to borrow £75 million as a matter of urgency, a move which ministers are considering.
There are reports an unspecified "part of the company" could fall into administration as soon as Wednesday.
Sky News reported "people briefed on the discussions" said British Steel's collapse could trigger the end of steel production at Scunthorpe.
British Steel employs 6,000, including more than 4,000 in North Lincolnshire, and is one of the biggest single employers in the Humber region.
The seriousness of the situation is underlined by the company commenting on the situation, while not addressing some of the more explicit elements. It has already received a £120 million commercial-terms loan to met environmental legislation after credits were stopped by Brussels amid Brexit uncertainty.
A spokesperson for British Steel said: ”As we have previously commented, the uncertainties around Brexit are posing challenges for all businesses including British Steel, and we are holding constructive discussions with our stakeholders on how to navigate them.
“Last month the company agreed a short-term bridge facility with government to help it meet its EU emissions obligations, and discussions are continuing about a package of additional support to assist the company address broader Brexit-related issues, whilst continuing with its investment plans.”
Several thousand more jobs in the supply sector are dependent on the giant, bought for £1 by Greybull from Tata Steel back in 2016. It comes in the same week a joint venture between Tata and German rival Thyssenkrupp fell through in Port Talbot, where Tata held on to the plant when its Scunthorpe-focused Long Products asset was sold.
It was seen as making solid progress, with a return to profit heralded in the first 100 days, and turnover up year on year subsequently.
The recent track record had made for appealing reading for backers, going from a £79 million loss in 2016 to a £47 million profit last year and now £68 million.
British Steel has won major contracts across Europe for national rail operator supply, and is shortlisted as a potential construction logistics hub for the Heathrow Airport expansion, with a £50 million investment in the Rod Mill also progressing.
However, the carbon issue coming to the fore underlined how cash flow may be tight, with the company the only energy intensive user to have a bid for help made public. It also announced 400 white-collar redundancies, though didn't reveal the number made, and culled its sponsorship of Scunthorpe United in the past 12 months.
It recently ended a year-long search for a chief executive, appointing from within, after the short stay of Peter Bernscher, who spent seven months in the job before leaving in December 2017. Financial director Gerald Reichmann replaced him last month. And prior to that it had handed back control of Immingham Bulk Terminal to Associated British Ports.
There was also a £47 million bill for a blast furnace chill – one of the most serious outages a works can suffer – that was not counted in the last year's finances as an insurance claim was pursued. The resolution there may also have an impact. Discussions are ongoing, British Steel has confirmed.
Scunthorpe MP Nic Dakin, pictured left, said it was important to have a “considered response” to the reports, and said the company’s workforce and management had already “faced many challenges very well”.
He said: “This is going to be deeply worrying for British Steel workers and their families and people working in the supply chain, as well as the community generally.
“What we can say which is optimistic is British Steel and the Government have been in conversation for some time about a variety of issues and we saw the Government rightly step up and take action to address the issue around the carbon emissions trading scheme.
“In the British Steel statement, they make it very clear that they are having key discussions with key stakeholders. Everybody has rolled their sleeves up to do the right thing and I am trying urgently to speak to ministers to get some confidence into the system.”
It is likely to fall to Secretary of State for Business, Energy and Industrial Strategy, Greg Clark, no stranger to heavy industry – and the impact losses can have - having been brought up on Teesside.
Labour’s Shadow Steel Minister Gill Furniss said: ”This is extremely worrying news, which will come as a shock to the thousands of British Steel workers who have worked against the odds to defend the company’s future.
The Government’s continued failure to support this vital industry is to blame. The Conservatives have failed to secure a steel sector deal that would address long standing issues such as high energy costs, and their threat of a no-deal Brexit has caused great uncertainty for the sector.
“We are urgently calling on the Secretary of State to announce what steps he will take to avert this crisis, so that everything possible is done to protect British steelworkers.”
Community, which is the biggest trade union representing Scunthorpe steelworkers, has urged everybody involved in the discussions to recognise the consequences of not doing everything possible to secure its future.
A spokesman said: “We are aware of the situation and are having ongoing discussions with the company at the highest levels.
“These reports will be extremely worrying news for all British Steel workers and many more in the supply chains. We understand that talks are continuing between the company, the government and lenders.
“We would urge all parties to recognise the consequences of not taking the necessary steps to ensure British Steel can continue.
“Everyone needs to do absolutely everything to give the company the chance of a future as to do otherwise would be devastating for thousands of workers and their families.”