Ministers ask Hunt for £300m to avert mass losses of British Steel jobs | Business news

[ad_1]

Ministers are urging the chancellor to provide £300m of taxpayers’ money to avoid closing British Steel’s blast furnaces – a move that would lead to thousands of lost manufacturing jobs in the north of England.

Sky News has learned that Grant Shapps, the business secretary, and Michael Gove, the settlement secretary, wrote to Jeremy Hunt this month to warn that BS’ demise could cost the government up to £1bn in decommissioning and other liabilities.

In their letter, a copy of which was seen by Sky News, Mr Hunt is asked to look at the economic case for supporting both British Steel, which is owned by a Chinese group, and the wider British steel industry.

“Every other G20 country has maintained their domestic steel production, and while we don’t think this should come at any price, we do believe it is in HMG’s interest to offer well-designed and targeted financing that unlocks private investment, delivers good results for taxpayers, and enabling domestic converted, decarbonized and viable steel production to continue in the UK over the long term.”

“We don’t want to depend on steel sources elsewhere in the same way that energy security has become intuitively important.

“Moreover, our steel requirements will increase by 20% due to large domestic infrastructure projects already committed in the UK.”

An industry source briefed on the Whitehall discussions said the chancellor had instructed Treasury officials to examine the application.

The letter to Hunt warned that British Steel had “no viable business without government support”.

Photo: British Steelworks at Scunthorpe

“The closure of one blast furnace would be a stepping stone to the closure of the second blast furnace, leading to a very unstable business model dependent on Chinese steel imports,” wrote Mr. Shapps and Mr. Goff.

The local economic impact of the blast furnace closures is estimated to be between £360m and £640m, plus the £500m to £1bn liability of HMG through compulsory liquidation, insolvency and land liabilities (although £40m It can be raised through asset recovery.”

“Given the scale of the liabilities owed by HMG in the event of a blast furnace closure, and following the Prime Minister’s directive, we would like those in charge to test whether net government support in the region of £300m for British Steel can prevent a shutdown, protect jobs and create a cleaner, longer viable future.” term for UK steel production”.

The fate of British Steel, which Jingye Group bought out of an earlier bankruptcy less than three years ago, has become increasingly unclear in recent months as the current owners indicated they would not sustain operations without taxpayer funding.

British Steel employs around 4,000 people, with thousands more jobs in its supply chain that depend on the company.

According to the letter to Mr Hunt, British Steel has already told the government it may shut down one of its Scunthorpe blast furnaces as soon as next month, with the loss of 1,700 jobs.

This will be followed by a second blast furnace shutdown later in 2023, write Mr. Shapps and Mr. Goff, resulting in a cumulative direct job loss of about 3,000 jobs.

The appeal to Hunt followed a round of talks between Shapps and Genji earlier in December about subsidizing Britain’s second-biggest steel producer.

Shapps’ predecessor, Jacob Rees-Mogg – who lasted only weeks as business secretary under Les Truss – opened formal talks with Gingee in October about providing state funding to help British Steel decarbonise.

One of the preconditions Whitehall set for the discussions was that Jingye would not cut jobs at British Steel during the discussions, although a recent letter to Mr Hunt said ministers “cannot guarantee that the company will choose to support jobs in the short term”.

Tata Steel, the largest player in the UK steel sector, has also requested financial assistance from the government.

In response to a query from Sky News, a government spokesperson said: “The government is committed to securing a sustainable and competitive future for the UK steel sector and we are working closely with industry to achieve this.

“We know that companies are feeling the impact of rising global energy prices, including steel producers, which is why we announced the Energy Bill Relief Scheme to reduce costs.

“This is in addition to the extensive support we have provided to the steel sector as a whole to help with energy costs, which have been worth more than £800m since 2013.”

Asking Jingye for financial support poses a political problem for ministers, given the scale of potential job losses that could result from a refusal to provide taxpayer assistance.

However, the agreement to provide significant taxpayer funding for Chinese-owned businesses would inevitably spark anger among conservative critics of Beijing.

China’s role in global steel production, after years of international trade disputes over dumping, will make any subsidy more contentious.

In May 2019, the official takeover was set to take control of the company after negotiations over an emergency £30m government loan broke down.

British Steel was formed in 2016 when India’s Tata Steel sold the company for £1 to Greybull Capital, an investment firm.

As part of the deal that secured British Steel’s ownership of Jingye, the Chinese group said it would invest £1.2 billion in modernizing the business over the next decade.

Gingee’s purchase of the company, which was completed in the spring of 2020, was hailed by Boris Johnson, then prime minister, as he emphasized the future of steel production in Britain’s industrial centres.

British Steel previously said of its negotiations with Whitehall: “We are continuing formal talks with the UK Government to help us overcome the global challenges we currently face.

“The government understands the significant impact of the economic slowdown, rising inflation and exceptionally high energy and carbon prices on companies like ours and we look forward to working together to build a sustainable future.”

[ad_2]