British Steel is on the verge of completing a £70m rescue deal with Chinese industrial firm the Jingye Group.
The bailout could save more than 4,000 jobs at the struggling steel producer, and up to 20,000 additional posts in its supply chain, according to Sky News.
The Jingye Group has offered £70m for British Steel, as well as assurances that it can access “up to £300m in loans, indemnities and grants”, The Independent adds.
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Gareth Stace, director general of industry lobby group UK Steel, told BBC Radio 4’s Today that the business being bought was a “significant asset to our country” as it makes up a third of UK steel production, mostly from Scunthorpe.
The UK Government had been in talks with the company behind Turkey’s military pension fund, Ataer, about a possible takeover of British Steel, but when those talks came to a halt Jingye stepped forward in October.
Sky News adds that the bailout would be “an important sign of the government’s commitment to steel manufacturing in the UK”, which has struggled in recent decades.
What happens next?
A formal announcement is expected today, with the Grimsby Telegraph reporting that staff are currently celebrating after being told by negotiators that the deal has been done.
The Independent reports that Jingye plans to “boost production at the plant by 10 per cent”, an increase from 2.5 million tonnes of steel per year to more than three million.
According to the BBC, the Chinese company has also said that costs may need to be cut in order to turn around British Steel’s fortunes, with national officer for the GMB union, Ross Murdoch, saying that “we cautiously welcome” the sale.
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Why is British Steel struggling?
British Steel has been kept running by the government since May, when the company went into liquidation.
In 2016, it was bought by private equity group Greybull Capital for £1. Greybull pledged to invest £400m to revive the company, but two years later the company entered insolvency.
The Guardian reports that Brexit has had an effect on the company’s problems, because “British Steel’s overseas customers do not know what tariffs will apply to steel they buy from the company”. The newspaper adds that orders from the EU have slowed down as a result.
This has happened against the wider backdrop of the UK struggling more generally, mainly because of overcapacity in EU steelmaking and Chinese state-subsidised firms producing cheap steel.
According to the Guardian, the steel industry employed 323,000 people in 1971, but now employs less than a tenth of that, at 31,900.
