Chancellor Jeremy Hunt is on the verge of approving a £300 million rescue package for Britain’s second-largest steel manufacturer. A move that might prevent the loss of thousands of jobs.
The Treasury is close to approving a £300 million rescue plan for the second-largest steel maker in the United Kingdom. To reduce its carbon footprint and prevent the loss of thousands of industrial jobs in northern England.
Following the intervention of Grant Shapps, the business secretary, and Michael Gove, the leveling-up secretary. Chancellor Jeremy Hunt has been urged by authorities to grant a request for public funding from British Steel.
The government is likely to inform the corporation of its choice in the coming days. Which will result in the company receiving approximately £300 million over the following few years.
According to a source close to the matter, the cash would be “directly tied” to a project to replace British Steel’s blast furnaces at its Scunthorpe location with a greener electric arc furnace.
The insider stated that Jingye Group, the Chinese owner of British Steel, will be required to invest at least £1 billion in the business by 2030 and make guarantees about job retention.
If these conditions are not met, the Treasury may opt not to proceed with funding.
Given British Steel’s Chinese ownership and worries about its adherence to financial pledges set. When it bought the company out of insolvency proceedings in 2020, a decision to approve it will be controversial.
In a letter to the chancellor sent in December, his cabinet colleagues warned that the death of British Steel might cost the government up to £1 billion in decommissioning and other obligations.
Hunt to approve £300m funding
They warned Mr. Hunt that British Steel “had no viable business without government assistance.”
Mr. Shapps and Mr. Gove stated, “closing one blast furnace would lead to the shutdown of the second blast furnace. Resulting in a highly unstable business model dependent on Chinese steel imports.”
“Given the magnitude of the liabilities expected to fall on HMG in the event of blast furnace closure. And by the PM’s directive, we would like officials to examine whether net Government support in the region of £300 million for British Steel could prevent closure, protect jobs, and create a cleaner, more sustainable future for steel production in the United Kingdom.”
Additionally, they believed that preserving control over steel manufacturing was essential for the UK economy.
Mr. Shapps and Mr. Gove wrote, “Every other G20 nation has maintained domestic steel production. And while we do not believe that this should come at any cost, we do believe it is in HMG’s interest to offer well-designed and targeted funding that unlocks private investment, achieves a good outcome for taxpayers, and enables transformed, decarbonized, and economically viable domestic steel production to continue in the UK over the long term.”
“We do not want to become dependent on foreign steel sources in the same manner that energy security has become obvious.
In recent months, the future of British Steel, which was acquired by Jingye out of an insolvency proceeding less than three years ago, has grown increasingly uncertain since the present owners have stated that they will not continue operations without government assistance.
British Steel employs approximately 4,000 people, with thousands more relying on the company’s supply network.
Jobs menace
According to the letter from the previous month, British Steel had previously told the government that one of the blast furnaces at Scunthorpe could close as early as next month, resulting in the loss of 1,700 jobs.
This would be “followed by the closure of the second blast furnace later in 2023. Resulting in about 3,000 cumulative direct employment losses,” Shapps and Gove wrote.
Jacob Rees-Mogg, who lasted only weeks as business secretary under Liz Truss, began official discussions with Jingye in October regarding the possibility of government funding to assist British Steel in decarbonizing.
Whitehall stipulated that Jingye would not eliminate jobs at British Steel while negotiations were underway. But, a subsequent letter to Mr. Hunt stated that governments “cannot guarantee. That the company will choose to support jobs in the medium term.”
Tata Steel, the largest participant in the UK steel industry, has also asked for government assistance in the past year.
Given the magnitude of the possible job losses that could arise from a refusal to provide taxpayer aid. Jingye’s request for financial assistance poses a political challenge for ministers.
Subsidies contentious
An agreement to grant major taxpayer support to a Chinese-owned enterprise will infuriate Tory critics of Beijing.
After years of international trade disputes over dumping, China’s prominence in global steel production would make any subsidies considerably more problematic.
In May 2019, the Official Receiver was appointed to assume control of the company following the breakdown of discussions for a £30 million emergency government loan.
British Steel was founded in 2016 after India’s Tata Steel sold its business to the investment firm Greybull Capital for £1.
As part of the agreement that gave Jingye ownership of British Steel. The Chinese company stated that it will invest £1.2 billion over the next decade to modernize the company.
The then-prime minister, Boris Johnson, heralded the completion of Jingye’s acquisition of the company in the spring of 2020. As ensuring the future of steel production in Britain’s industrial heartlands.
British Steel “can play an important part in the economic resurgence of the United Kingdom.”
“To assist the road to net zero, our owners, Jingye, have invested £330 million in capital projects during their first three years of ownership. And they continue to invest unprecedented sums of money in British Steel,” a British Steel official told.
“Jingye is committed to our long-term future. But we also expect the United Kingdom government to give the required assistance, laws. And frameworks to back our efforts to become a clean, green, and sustainable business.
“We are continuing official discussions with the government regarding decarbonization and other global challenges.”
“The government recognizes the tremendous impact that the economic recession, rising inflation. And unusually high energy and carbon prices are having on enterprises like ours. Especially during such a crucial phase of our transformation.
“British Steel can play an important role in the economic revival of the United Kingdom. And we look forward to collaborating with the government to produce the domestic steel that the country will require for years to come.”
Both the Department of Business, Energy, and Industrial Strategy and the Treasury have been asked for a response.
