British Steel - an uncertain future

On May 22^nd, the High Court ordered the compulsory liquidation of British Steel, after talks to secure an emergency £30 million loan from the government failed. This has put 5000 jobs at risk, and endangered a further 20,000 in the supply chain. As the search for a buyer continues, we take a look at what happened at British Steel and what the future could hold...

What happened?

In 2016 Greybull Capital bought British Steel for £1 from Tata Steel, in an optimistic buyout with promises of significant investment to reinvent the company. A mere 3 years later it has entered insolvency. A variety of explanations have been offered, including reduction in market demand and Brexit uncertainty.

Recent weakening of the pound and euro have also caused the cost of raw materials to increase, reducing competitiveness. In a bid to increase competitiveness, 400 jobs were cut worldwide in 2018.

The latest

Unfortunately, as government negotiations to secure an emergency loan failed, the search for a buyer began. Due to the complicated nature of the business however, this is expected to take longer than originally hoped as negotiations have passed previous deadlines of June 30^th and July 15^th.

British Steel is now reliant upon various buyers putting in a bid for the company and saving it from closure. Currently there is understood to be around 10 potential buyers, with around half bidding for the company as a whole.

What does the future hold for British Steel?

It seems hard to predict exactly what will happen with British Steel and when, so we have explored the likely outcomes:

1) Buyer is found for whole business

This is hailed as the optimal solution for all parties to increase the chance of long-term survival, yet seems increasingly unlikely. It would likely require restructuring and potentially result in some job losses to increase competitiveness as seen in 2018.

2) Buyers are agreed for parts of the business

This outcome would see buyer’s cherry pickcertain areas of the company, such as the French Operations or TSP Projects, British Steels design consultancy. This option seems favoured by bidders who would be able to pick the most competitive areas. However, Trade Unions and Governments have heavily criticised this approach suggesting that it still puts thousands of jobs at risk and will disrupt the supply chain.

3) No bids are accepted

While still optimistic a buyer will be found, a no buyer result must be considered. Consequently, talks with governments may be revisited, with the potential for increased support to be offered to attract more bids. This could also take place in the form of a Network Rail bid, which is government controlled and therefore could be seen as indirect nationalisation.

4) No buyer is found

If no buyer is found and revisited negotiations fail causing the steelworks to shut down, over 5,000 jobs would be lost. This would also force Britain to rely on importing increasing volumes of steel from overseas producers.

British Steelmaking was once a powerhouse of British Industry, with the North of England being the centre of the worlds steel production in the 1800’s. While the future of British Steel is uncertain, the industry remains hopeful that it can overcome these changes and return to a position of strength.

As well as being the home to most of British Steel's UK operations, the North of England was also the founding home of Dutton in the 1980’s; where Harry Dutton set out to supply high quality staff to the Engineering Industry. Now, decades later, Engineering is still a fundamental sector to us and the North houses our Headquarters in Sheffield. 

You can find out more about our history or browse our latest engineering roles by clicking the links!