British Steel collapses, costing thousands of jobs

British Steel sign

British Steel sign

Business Secretary Greg Clark said: "This will be a deeply worrying time for the thousands of dedicated British Steel workers, those in the supply chain and local communities".

Private equity firm Greybull Capital bought British Steel for a nominal £1 during the depths of the steel crisis in 2016 and it had recently returned to profit. Britain and the world will continue to need high quality steel, and British Steel is amongst the best in the world. Control of the company will now pass to the Official Receiver - an employee of the Insolvency Service - who will run a compulsory liquidation.

The move by Britain's second-biggest steel maker threatens more uncertainty for thousands of workers at the company's plants, mainly at Scunthorpe where more than 4,000 are employed.

British Steel's owner, Greybull Capital, had blamed a number of Brexit-related issues for its problems as it sought a financial support package to save the company.

British Steel had asked the government for a 75 million pound loan but has since reduced its demand to 30 million pounds after Greybull agreed to put up more money, according to one of the sources who is close to the negotiations. It also called into question the fate of Britain's largest steelworks in Port Talbot, Wales, owned by Tata Steel. Just last week, the company was in talks for additional funding from the government.

Turning a profit in steel is particularly hard in Britain, where steelmakers pay some of the highest green taxes and energy costs in the world, as well as facing high labor costs and business rates.

"Throughout the entire Brexit process, the voice and interests of businesses - and of devolved governments, including Scotland - have been ignored and side-lined".

British Steel has around 5,000 employees, with the majority in Scunthorpe and the North East.

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Insolvency partner at Shakespeare Martineau, Michael Mulligan, adds: "Customers and suppliers of British Steel must act quickly to mitigate against a Carillion-style domino-effect".

Christopher Greenough, commercial director at Shrewsbury-based pressings specialist Salop Design, said: "Again we see that the lack of investment in United Kingdom steel has led it to become uncompetitive in a very much productivity focused sector".

It had already secured a government loan of around £120 million ($154 million) this month to enable it to comply with the European Union's Emissions Trading System (ETS) rules.

Labour's shadow business secretary, Rebecca Long Bailey, called for the company to be nationalised.

"Ministers must be prepared to make use of all the options, including nationalisation, in order to save British Steel and the wider steel industry".

"Greybull could walk out with millions because they secured all their loans against the assets".

The UK government has a chequered history with Greybull, after the collapse of the firm's airline Monarch in 2017 forced the government to repatriate more than 100,000 stranded tourists at a cost of about 60 million pounds.

The Mayfair-based firm also provided backing for the buyout of British high street electronics chain Comet before its collapse in 2012. Other sites include the Teesside construction steel mill and Skinningrove special profiles plant.

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