Thousands of jobs at risk as British Steel stands on brink of administration

Manufacturer British Steel is said to be on the verge of administration today, with Labour leader Jeremy Corbyn calling for its nationalisation.

If the company falls into administration, around 5,000 jobs across sites in Scunthorpe, Rotherham, and Middlesborough and several other sites could be in danger. It’s also been suggested that 20,000 jobs in the supply chain would be affected.

Currently sources say that the business is still lobbying the government for backing, having asked it for a loan of £75m to keep afloat.

British steel is the country’s second-largest steel producer, and is owned by private equity firm Greybull Capital which acquired it in 2016 from Tata Steel for £1.

Following the acquisition, it looked like the turnaround was proving successful, with the manufacturer reporting EBITDA of £68m in 2018, compared to £47m in 2017.

However earlier this year it was forced to borrow £120m from the Department of Business, Energy and Industrial Strategy to pay its EU carbon emissions bill, and reportedly asked for a further £75m to enable it to continue trading over the next few months.

Listed industrial services group Hargreaves noted the speculation around the potential collapse of British Steel his morning.

It has been supplying material handling services to British Steel for eight years, and employs 170 people in these operations. It warned today that redundancies were a real possibility if the future of British Steel remained in doubt.

Its board estimates that the group has a current net exposure of around £4.5m to British Steel comprising trade debt and work-in-progress balances, which may prove to be irrecoverable were British Steel to be unable to continue trading.

If British Steel ceases to trade, it said, this could reduce the Group’s revenue in the next financial year by approximately £11m and its profit before tax by about £1.3m.

Warning of the potential impact of a British Steel collapse, Labour has called for the government to prepare to nationalise the business if a solution to its financial issues cannot be thrashed out.

Corbyn said: “The collapse of British Steel would have a devastating impact on thousands of jobs in Scunthorpe, and could have major knock on effects on wider supply chains.

“Britain’s proud steel industry has a major role to play in ushering in a Green Industrial Revolution, securing British manufacturing for a sustainable, green future. It needs support, not a death warrant.

“If an agreement cannot be struck with British Steel, the government must act to take a public stake in the company to secure the long term future of the steelworks and protect peoples’ livelihoods and communities.”

Union GMB has said that Westminster must “put its money where its mouth is” and redouble efforts to save the company.

The Guardian reported that EY have been lined up to handle the administration if it arises.

This comes following major financial difficulties which has led to the manufacturer looking to the government for support.

EY and British Steel have been contacted for comment.

Close