After a plea for a government bailout was rejected, the High Court ordered a compulsory liquidation of the company and appointed the Official Receiver, a civil servant who will oversee the process alongside accountancy firm EY, according to the Financial Times.
British Steel is owned by Greybull Capital and employs around 5,000 people directly – mostly in Scunthorpe, northern England – while another 20,000 people depend on its supply chain. The liquidation came about after a breakdown of talks between the Conservative government and Greybull over an emergency loan to keep the company solvent.
Government reluctant to bail British Steel out
In 2016, Greybull bought British Steel from Tata Steel for one pound. In 2017, the renamed British Steel turned a profit, however, in 2018, 400 employees were laid off with the company claiming the reduction in the workforce was due to the weak pound and uncertainties surrounding Brexit.
Even though Brexit has played a part in the decline of British Steel, things are still up in the air, especially with the UK due to leave the EU on October 31, and the terms of that separation have not been agreed upon. This means British Steel’s overseas customers do not know what tariffs will apply to steel orders. The bottom line here? Orders have dried up, reports The Guardian.
Greg Clark on British Steel liquidation: “We will take every possible step… to ensure jobs are secured,” says business secretary, but EU rules forbid government from bailing the company out
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— BBC Politics (@BBCPolitics) May 22, 2019
Britain’s Conservative government says propping a company up “goes against the party’s free-market ethos unless absolutely unavoidable.” Besides, the government had already loaned British Steel £120 million to cover an EU bill for carbon dioxide emissions earlier this month.
Actually – the official stance for not loaning the company any additional money has to do with the fact it would have been unlawful under European Union state aid rules, and the UK is still bound by EU rules until the country breaks free.
Prime Minister Theresa May told MPs that the government was working with all parties to “explore all potential options to secure a future for the company.” She also said the Treasury has provided the Official Receiver with an indemnity “to enable British Steel to continue to operate in the immediate future.”
Roy Rickhuss, general secretary of the Community union, said: “While the coke ovens keep burning and the steel assets remain there continues to be hope both for steelmaking at Scunthorpe and for its downstream operations. What is needed is the right ownership.”
