The new Chinese owner of British Steel is seeking another £100m of taxpayer support less than three months after completing its takeover of the insolvent Scunthorpe-based group.
Sky News has learnt that Jingye Group, which bought the steelmaker in March, has asked the government for a commercial loan as the industry struggles to find a way through the coronavirus pandemic.
The request from British Steel is understood to be under consideration in Whitehall.
It is the latest such appeal from a sector placed under extreme strain by the pandemic, with aggregate requests for support now understood to be approaching £1bn.
Sky News revealed last month that Tata Steel, owner of the Port Talbot steelworks in Wales, was seeking a £500m commercial loan.
Liberty Steel is said to have asked for roughly £250m, while Celsa, a Spanish-owned group, has requested a much smaller sum said to be in the low tens of millions of pounds.
The Scunthorpe-based group collapsed into compulsory liquidation almost exactly a year ago, putting roughly 4000 jobs at risk at the company and many thousands more in its supply chain.
Following months of talks with bidders from Turkey and China, the Official Receiver struck a deal with Jingye.
A taxpayer indemnity covering the costs of running British Steel during the intervening nine months is understood to have cost in the region of £800m.
Jingye’s effort to secure new government support for the UK’s second-largest steelmaker could come in the form of a direct loan.
Alternatively, changes to one of the Treasury’s emergency lending programmes – the Coronavirus Large Business Interruption Loan Scheme (CLBILS) – could provide an alternative solution.
The Financial Times reported this week that ministers were preparing to increase the maximum loan available under the scheme from £50m to £200m.
Steel industry sources cautioned, however, that such an amendment might not help Jingye, because its lack of a trading history in the UK would make it harder for a commercial bank to lend to the company using CLBILS.
British Steel was previously a subsidiary of the Indian conglomerate Tata, which remains the owner of the Port Talbot site.
The Scunthorpe-based group has flirted with insolvency on previous occasions as the economics of steel production in the UK have become less attractive – and further complicated by the uncertainty over future trading relationships with the EU.
British Steel collapsed into insolvency last May after the government decided against providing £30m to the company under its then-owner, Greybull Capital.
That came just weeks after ministers did agree to provide an emergency £120m loan to cover the cost of an EU carbon credits scheme for industrial polluters.
A British Steel spokesman said: “Like many businesses we’ve been in contact with the UK government throughout the pandemic.
“We’ve robust measures in place to protect our people and our business and are grateful for the ongoing support of our employees, owners, customers, suppliers and government.”
A request for aid from UK taxpayers from a Chinese-owned company could be controversial given escalating geopolitical tensions over the provenance of the COVID-19 crisis.
The proximity of the plea from British Steel to Jingye’s takeover completing might also be contentious, although people close to the situation pointed out that the Chinese negotiations about the deal had been underway for months before the new strain of coronavirus emerged.
British Steel’s turnaround plan has been derailed by the pandemic, with hundreds of its employees initially furloughed under the government’s wage subsidy scheme.
Many of them returned to the company’s Skinningrove plant late last month.
The fate of British Steel became intertwined with the Conservative Party’s pledge to “level up” the UK economy in the run-up to December’s general election.
Following the completion of Jingye’s takeover, hundreds of workers were made redundant, although 3,200 jobs were saved by the new owners.
The Chinese group’s chief executive, Li Huiming, said at the time: “It has not been an easy journey since we first announced our intentions in November but the longer I have spent in Scunthorpe, the more I have come to believe in the successful future of these steelworks and the employees that have made them famous throughout the world.”
Together, we can forge a new partnership that will mark the beginning of a new illustrious chapter in the history of British steelmaking.”
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