The writing was on the wall, and the final blow came just hours before an important day for the UK. ‘British Steel collapses,’ read the headlines on Wednesday, May 22, less than 24 hours before polls opened and the country began voting for its EU Parliament representatives because MPs have yet to agree an exit deal. So it was no wonder ‘Brexit issues’ were the recurring reasons company bosses blamed British Steel’s collapse on.
When the dark days of Spring 2016, under Tata Steel’s loss-making Long Products division, were washed away with a £1 buyout from Greybull Capital, Scunthorpe was promised a ’new dawn’. Profits for the UK’s second biggest steel producer rose for the first time, but just three years later the company was back on its knees.
Two issues emerged as key factors in the company’s recent struggles, money and Brexit. External difficulties like the trade war between the US and China were also previously referenced.
Rick Smith, Managing Director of Grimsby-based company rescue service Forbes Burton, said: “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.”
The company added that the collapse could partially be 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.’
Two weeks ago, British Steel was provided with a £120 million loan by the Government to pay an EU bill for carbon dioxide emissions. Then this month British Steel needed to and have subsequently failed to raise £30 million within 48 hours.
Expected or not, the fall into compulsory liquidation is a shattering blow for the Scunthorpe economy. The search for a new buyer presents a chance of little optimism for the town which voted 66% in favour of leaving the EU.
Liberty Steel has emerged as a potential buyer with clear interests in the plant, owned by Sanjeev Gupta. In the meantime, the firm is trading normally, but it has quite an audience. Media crews performed a relay outside the gates of the site on the morning of Thursday, May 23. Protesting workers and campaigners pleaded “save our steel” down the camera lenses, and told reporters that the works are the area’s lifeblood.
The collapse of the company could be a death sentence for Scunthorpe, where the local economy centres around the site and where its 3,000-strong workforce make their living. The effect on other local businesses and the supply chain is estimated to impact more than 20,000 people.
Scunthorpe’s MP Nic Dakin said it was important that the business survives: “It’s in the public interest and in the interests of taxpayers to ensure this business survives. Government must take the necessary steps to ensure its future.”
The options available to the major Lincolnshire employer are stark. Find a buyer, nationalise, seek further financial help, or close down completely. One thing is certain: the answer won’t come from this week’s EU elections or any of the candidates.
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