UK’s second largest steel producer, British Steel, owned by investment company Greybull Capital, is facing imminent bankruptcy unless the government comes up with a solution.
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British Steel, UK’s second largest steel producer, and owned by investment company Greybull Capital, well-known for the failure of Monarch Airlines which left over 100K passengers stranded in 2017, is facing imminent bankruptcy unless the British government comes up with a solution to save the steel manufacturer.
The company currently employs some 5 000 people, with an estimated 20 000 other jobs dependent on its supply chain, mainly being suppliers. Most of the staff and operations are located in the British town of Scunthorpe, in North Lincolnshire, close to the port of Hull.
British Steel has been struggling to operate normally, partially blamed on the current situation with Brexit and the uncertainty surrounding it. Due to Brexit, European customers have avoided ordering from British Steel, unsure on whether tariffs will be applied if the UK government fails to obtain a deal with the European Union. Also due to Brexit, the steel manufacturer did not get new free carbon permits for 2019. To avoid paying a half a billion fine, the British government decided to temporarily loan them, back at the beginning of May, some 120 million pounds, allowing the company to comply with the rules in place.
Now, the owner of British Steel, Greybull Capital, is requesting, once again, a loan from the government, claiming the company is on the verge of collapsing. Originally, the owner wanted some 75 million pounds, but later on reduced this to 30 million pounds. This request was made public on Monday 20th, with the deadline being the next day, barely 48 hours later. The government is currently studying the various options, which go from lending the money requested, nationalising British Steel, or not doing anything, knowing that their decision could set a precedent.
One of these options, lending the money to the company, faces a severe downside, with the risk of Greybull Capital getting the money if the company does end up failing, which essentially means giving taxpayer money to a private firm. On top of this, Greybull Capital is not seen with a keen eye by most, due to the failure of Monarch Airlines, but also due to various curious moves with British Steel, such as the firm charging an interest of 9.6% on the loans given to the manufacturer, or recently spending over 40 million pounds on buying a steel mill in France. Greybull Capital is also charging what is seen by many as very expensive “management fees”, amounting to 250K £/month, for a total of over 6 million pounds since they bought the plant. This, coupled to the over 30 million pounds charged in interests, raises even more questions, explaining why the government is so reluctant in helping British Steel and Greybull Capital again.
As we were writing this article, it was announced the talks between Greybull Capital and the British government were unsuccessful, leading to the collapse of British Steel.
More on this subject:
- Brexiters believing it’s 1944 attempt to sabotage the British railways (4/04/2019)
- With Brexit completely gone downhill, a petition asking to revoke Article 50 has garnered over 4 million signatures (24/03/2019)
- Another company leaving the UK due to Brexit: Panasonic’s headquarters move to Amsterdam (24/09/2018)
- Airbus and BMW warn about consequences of a forced Brexit (27/06/2018)