Probe into Liberty Steel warns of high risk finances and lack of accountability

MPs want investigations into the owners of Liberty Steel and its boss Sanjeev Gupta to stave off another crisis in the industry.

Auditors who approved the accounts at Liberty’s parent company, GFG Alliance, should also be questioned, MPs on the business committee say in a report.

Liberty Steel has operations in Rotherham, Stocksbridge and Scunthorpe. Gupta’s GFG Alliance was forced into a financial restructuring when its key lender, Greensill Capital, collapsed.

Greensill made money through supply chain finance – issuing loans to companies that are waiting for invoices to be paid by their customers. When the invoices were paid, the cash would be there to pay investors back, with interest.

But the report by the Business, Energy and Industrial Strategy Committee says the use of such finance and the way Gupta structured his businesses was “questionable.”

It concluded Ministers must be aware of the “systemic risks” to the UK steel industry posed by unusual corporate structures such as those used by GFG Alliance.

The report also says Gupta put senior members of his staff in an “unacceptable position” by not giving them necessary access to information or decision-making authority required to perform their duties.

And the report states regulatory authorities should conduct an investigation into King & King, the auditors of a number of GFG Alliance businesses, while The Insolvency Service should consider whether Gupta has breached his fiduciary duties as a company director.

The report notes: “We believe that until Mr Gupta restructures his GFG Alliance companies into a more acceptable corporate structure and publishes consolidated accounts that are adequately audited, that he fails to fulfil the criteria that we believe should be applied to define a fit and proper person for the purposes of receiving any form of Government support.”

Darren Jones, chairman of the committee, said the steel industry was too important strategically to be left exposed to international competition, high risk finance, and volatile energy prices.

He added: “The evidence we heard during our inquiry has highlighted serious problems with high-risk financial practices, weaknesses in audit, and about inadequate accountability and corporate governance arrangements within GFG Alliance.

“Sanjeev Gupta must urgently fix these problems if he is to be seen as a fit and proper owner of steel companies in the UK.”

GFG has responded that since the committee took evidence, it has embarked a restructuring and refinancing that included injecting £50m to restart its Rotherham and Stockbridge operations.