5,000 jobs at risk as funder falls into administration
The UK steel industry is once again at risk, with circa 5,000 jobs or 16% of those employed in the industry, at risk after the collapse of Greensill Capital.
Greensill was one of the UK’s largest speciality banks and a major provider of finance to Liberty Steel, which was operations in Rotherham, Stocksbridge, Motherwell, Newport and Hartlepool, employing 3,000 people.
The steel company is part of Sanjeev Gupta’s GFG Alliance and led to the businessman being referred to as the “Saviour of Steel” when he saved jobs and assets with the purchase in 2017 from Tata Steel.
However, according to court fillings from Greensill, Gupta’s operations have been in “financial difficult” and defaulted on debt, with the bank estimated to have $5bn exposure to the business.
GFG Alliance denies this claim and states it has adequate funding.
This is the latest twist in the saga of steel in South Yorkshire, with Liberty announcing at the start of 2020 that it planned to cut 280 jobs in the region, due to challenging market conditions. This was followed in June by news that the firm planned to ramp up production at its plant in Rotherham.
The collapse of Greensill, which has appointed Chris Laverty, Trevor O’Sullivan and Will Stagg from Grant Thornton as joint administrators of Greensill Capital and Greensill Captal Management, is said to put at risk not just the 3,000 roles within Liberty Steel but a further 2,000 roles within the group’s engineering businesses.
It is understood that talks are ongoing. Gupta met with union officials on Tuesday, with them calling for the businessman to “tell us exactly what the administration means for Liberty’s UK business”,
The Community union added: “The future of Liberty’s strategic steel assets must be secured.”
Business Secretary Kwasi Kwarteng also held an emergency meeting with the chief executive of the UK steel company, John Ferriman where contingency plans were discussed in the event of Greensill went into administration, with nationalisation not considered as an option.
The UK steel industry has faced numerous challenges since it was privatised in the 1980s, with employment and output falling as it struggles to compete with cut price competition from China.The industry now employs 32,000 people, a tenth of the number employed during the sector’s heydey of the 70s.
Just 12 months ago British Steel was the latest firm to be facing close, having entered the insolvency process in May 2019, before Chinese firm Jingye Group acquired the business and pledged to invest £1.2bn into the firm and saved 3,200 jobs in March 2020.
A spokesperson for Grant Thornton said: “The joint administrators are in continued discussion with an interested party in relation to the purchase of certain Greensill Capital assets. As these discussions remain ongoing, it would be inappropriate to comment further at this time.”
Although reports suggest the interest mentioned by the administrators does not include the parts of Greensill involved to Gupta’s business.
A spokesperson for GFG Alliance said: “Our operations are running as normal and our core businesses continue to benefit from strong market conditions generating robust sales and cash flows.
“Our operational efficiency programme has improved profitability and we are making progress in our discussions with financial institutions that can help diversify our funding. We are keeping our employees up to date and will provide further updates as we deliver our plans.”
