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British Steel enters administration putting 25K jobs at risk

Steel News - Published on Thu, 23 May 2019

Image Source: British Steel
UK's second largest steel producer British Steel owners Greybull Capital and the UK government could not reach agreement over a potential loan and the government's official receiver will now take control of the company as it looks to find a rescue plan with accountancy firm EY as a special manager to seek a buyer. The insolvency process puts 5,000 jobs at risk with a further 20,000 in the supply chain as well as hitting the local economy. The official receiver said "The company in liquidation is continuing to trade and supply its customers while I consider options for the business. Staff has been paid and will continue to be employed. 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."

Unite, Britain and Ireland’s largest union, assistant general secretary Steve Turner, said “Despite today’s announcement to place British Steel into official receivership, Unite will continue to engage all parties in the fight to secure the future of the company. We are clear that the government must now step up and step in and bring British Steel into public ownership until a buyer can be found to avoid an economic and industrial catastrophe. While Greybull cannot be allowed to walk away scot free and must be held to account for its stewardship of Britain’s second largest steelmaker, ministers cannot wash their hands of the Brexit farce and on-going uncertainty that has placed the company in difficulty, nor allow a business of such strategic importance to UK plc to disappear like the steelworks of SSI several years ago. To do so would be a betrayal of a loyal workforce that has made great sacrifices to make British Steel a success and send economic shockwaves throughout the Steel industry, UK manufacturing and the households of 20,000 workers in the supply chain who rely on the steelmaker for their livelihoods. In the coming days Unite will be giving our members maximum support, while we engage with the administrators and press the government to give British Steel workers a fighting chance to continue their 150 years of steel making history for generations to come. Unite will also press for a full investigation into the financial engineering of Greybull that has left the taxpayer picking up the tab for a trail of corporate destruction which has wreaked havoc on the lives of working people.”

Tees Valley Mayor Ben Houchen has hit out at the company's handling of the steel firm's collapse. He said: “British Steel’s owners, Greybull Capital, have been complete sharks throughout this tragic process. Greybull offered a measly £1million to save the company, and then expected the taxpayer to cough up while they laughed all the way to the bank. It is clear that my request for temporary nationalisation to save 700 jobs has fallen on deaf ears. The Government argue that bailing out a failing company is prohibited under strict EU state aid laws, but I’m not buying it.”

Although the company is named British Steel, a historic reference to the former nationalised entity, it is owned by Greybull capital. Greybull purchased the crisis-ridden Scunthorpe plant for GBP 1 in 2016 from Tata Steel Europe. It branded its operations, centred on what was Tata’s Long Products division in the UK, as British Steel. Just weeks ago, Greybull was granted a GBP 120 million loan from the government to be paid back on favourable commercial terms to help it meet a European Union environmental bill over carbon emissions. The payments were necessitated due to the UK’s delayed departure from the EU, originally set for March 29. Greybull initially demanded a further GBP 75 million loan from the government as a prerequisite to staying in business due to the adverse impact of Brexit-related issues, a fall in orders and an ultra-competitive global steel market, but has lowered this to GBP 30 million.

The Financial Times reported this week, “Greybull’s initial contribution into British Steel from its own funds was less than GBP 20 million. Yet in the two years since, Greybull took GBP 6 million in management fees from British Steel. Accounting records show that Greybull Capital partners, Marc Meyohas, Nathaniel Meyohas, and Richard Perlhagen, charged British Steel GBP 3 million a year during 2017 and 2018. It also charged GBP 17 million a year in interest on loans it provided via a Jersey-based parent company, Olympus Steel, at a rate of 9%.

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Posted By : Sanju Moirangthem on Thu, 23 May 2019
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