UK Markets open in 1 hr 53 mins

British Steel owners line up £100m renaissance

Ben Marlow
british steel - Science Photo Library RM

The owners of British Steel are betting on a miraculous rebirth of UK steelmaking with plans to plough £100m into the company’s turnaround as it seeks to mount a fresh challenge to bigger foreign firms.

Private equity backers Greybull are in talks to raise tens of millions of pounds in fresh financing that will bankroll a radical modernisation of its creaking plants.

Although the proposals are at an early stage, the cash pile will fund investment in the latest hi-tech machinery, including new coke ovens.

Consultants at Alix Partners have been hired to lead the talks with prospective new backers. It will also pay for existing mills, in the UK and overseas, to be upgraded and made more competitive with those found on the continent.

Sources close to the company say the overhaul is badly needed after years of neglect at the hands of previous owners Tata Steel and Corus. It is attempting to close the gap on foreign rivals in France, Germany and Austria, which have been able to pull away from UK steelmakers with generous state support on energy costs and taxes.

More modern technology will enable bosses to produce higher grade, more profitable steel.

It is understood Greybull is in talks with various parties including European banks, specialist debt houses and government-backed funds to raise between £50m and £100m.

British Steel has six mills producing steel mainly for the rail and construction industries: two at its Scunthorpe headquarters; another in Teesside, where rival steelmaker SSI used to be based; a fourth in Skinningrove outside Middlesbrough; and separate plants in Belgium and the Netherlands.

The move comes after a difficult second year for Greybull, which rescued the business in 2016, paying just £1 in a deal that safeguarded thousands of jobs.

In its first 12 months, the steelmaker defied the odds to post a £47m profit following years of steadily climbing losses under Tata. The previous year it had fallen £79m into the red. However, in 2017, Greybull suffered a series of setbacks after the failure of some big pieces of machinery forced production to be halted for several weeks.

Production at its Queen Victoria blast furnace in Scunthorpe was temporarily halted last summer due to technical problems. The furnace, which is capable of producing 1.5m tons of iron per year, was out of action for several weeks. 

Although trading rebounded further last year, the technical issues cost tens of millions of pounds. Paul Martin, British Steel’s deputy CEO, said: “The turnaround is on track and we’re continuing to make significant investments.

We’ve committed £80m of capital, recruited 900 new employees and acquired a premium wire rod business in the Netherlands. We’ll continue to invest and we’ve held positive talks with other potential sources of finance.”