British Steel, Owned by China’s Jingye, Seeks Large Government Aid
- October 3, 2022
- Posted by: Quatro Strategies
- Category: Manufacturing
British Steel, Britain’s second-biggest steel producer and owned by China’s Jingye Group, is seeking an urgent package of financial support from the government amid renewed fears for thousands of industrial jobs in the north of England. The Chinese company bought British Steel back in 2020 out of insolvency. It has told the ministers that its two blast furnaces would not be viable without government support.
British Steel employs 4,000 people in its Scunthorpe plant, with thousands more in its supply chain. The request is set to cause a major problem for Britain’s new business secretary Rees-Mogg just ahead of the Conservative Party’s annual conference.
It is suggested that the company could look for hundreds of millions of pounds to keep its blast furnaces operational, while no formal announcement has been made.
It was also unclear whether any financial subsidy would be in the form of a loan or grant.
Jingye is said to be prepared to cut thousands of jobs if ministers reject its request. It would then plan to import steel from China to roll at British Steel’s UK sites.
The government confirmed on the weekend that it was working with the company to find the best possible solution.
Industries have been complaining over soaring prices, which have hampered their ability to keep investing.
Rees-Mogg is set to face a political headache over a decision of government support. On the one hand, no support would mean a significant number of jobs being lost. On the other, an agreement to provide subsidies to a Chinese owned business would almost certainly create harsh criticism from some in the party ranks.
China’s role in global steel production, after years of international trade rows about dumping, would make any subsidies even more contentious.
It is the second time in little more than three years that serious doubt has been cast over British Steel’s future.
In May 2019, the Official Receiver was appointed to take control of the company after negotiations over an emergency £30m government loan fell apart.
British Steel had been formed in 2016 when India’s Tata Steel sold the business for £1 to Greybull Capital, an investment firm.
As part of Jingye’s acquisition deal of the steelmaker, the Chinese company said it would invest £1.2 billion to modernize the business during the following decade.
Jingye’s purchase of the company, which completed in the spring of 2020, was hailed by former Prime Minister Johnson as assuring the long-term future of steel production in Britain’s industrial heartlands.
“Jingye’s pledge to invest £1.2 billion into the business is a welcome boost that will not just secure thousands of jobs, but ensure British Steel continues to prosper.” Johnson said at the time.
Other British steelmakers have also sought for government aid in recent months. In July, Tata Steel, Britain’s largest, has asked for £1.5 billion of taxpayer funding to help it decarbonize its operations.
Liberty Steel, the third-biggest player in the industry, saw a bid for £170m in state aid rejected last year by the then business secretary Kwarteng.
Now as finance minister, Kwarteng will play a key role in determining the fate of Jingye’s request for support.
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