It has been confirmed that British Steel has been placed into compulsory liquidation. The official receiver has now taken control of the company as part of the liquidation process. This has put 5,000 jobs at risk and another 20,000 in the supply chain could also be in danger.
The compulsory liquidation follows a break down in talks between the government and British Steels owner, Greybull.
A search for a buyer has already begun and the company will continue to trade normally for the time being.
This is not the first time the company has been in problems. Greybull bought the company for a nominal £1 during the steel crisis in 2016. It rebranded the firm as British Steel and had being enjoying a return to profit.
The most recent troubles could be partially blamed on ‘a slump in orders from European customers amid uncertainty about potential trading arrangements with the EU in the event of a no-deal Brexit’, according to sources involved in talks to save the company.
And, only two weeks ago, the company was provided with a £120 million loan by the Government to pay an EU bill for carbon dioxide emissions. British Steel needed to and have subsequently failed to raise £30 million within 48 hours.
Rick Smith, Managing Director of Forbes Burton, said:
“The full ramifications of Britain’s second-largest steel producer closing is that around 4,500 jobs are directly at risk and endangering up to 20,000 more in the supply chain. Around 4,000 jobs will be lost if a buyer can’t be found and the firms Scunthorpe plant has to close.
“Unfortunately, this could be the first major casualty of a messy Brexit, and more could follow. We’ve been watching the situation at British Steel unfold and we have seen this happen many times before. We know the problems and challenges that result from the fallout of such a massive firm going under.”
Official receiver
The Official Receiver said British Steel Ltd had been wound up in the High Court. It said the immediate priority was to continue safe operation of the site.
The company was transferred to the Official Receiver because British Steel, its shareholders and the government were not able to, or would not, support the business. That meant the company did not have to funds to pay for an administration.
“I appreciate that this is a difficult time for the company’s employees and I want to thank them for their ongoing co-operation,” the Receiver said.
“The company in liquidation is continuing to trade and supply its customers while I consider options for the business.
“Staff have been paid and will continue to be employed.”
The court appointed accountancy firm EY to the role of Special Manager, assisting the Receiver.
EY said the appointment of the Official Receiver followed “a number of weeks” of negotiations by management with the company’s various stakeholders, including lenders, shareholders and the government, to secure the necessary funding to avoid an insolvency.
“Regrettably, these efforts were unable to secure a solution before the company’s funding resources were exhausted.”
Source https://www.bbc.co.uk/news/business-48365241
Government says
Business Secretary Greg Clark said the government had shown its “willingness to act”, having provided the British Steel with a £120m bridging facility in April to meet EU emission rules and that the government had “worked tirelessly” with British Steel, Greybull and lenders to “explore all potential options to secure a solution for British Steel”.
However, he added: “The government can only act within the law, which requires any financial support to a steel company to be on a commercial basis. I have been advised that it would be unlawful to provide a guarantee or loan on the terms of any proposals that the company or any other party has made.”
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