British Steel collapses as administration threatens thousands of jobs

British Steel has fallen into administration, putting up to 25,000 jobs directly and indirectly at risk.

Britain’s second largest steelmaker was wound up by the high court this morning, in a move that threatens thousands employed at Scunthorpe’s huge steel plant and hundreds more on Teesside.

With an estimated 20,000 jobs also at risk in the supply chain in Scunthorpe, it could spell disaster for the local communities.

In a statement, the Official Receiver who oversees company administrations, said staff at the liquidated company would continue to be employed, and the firm would continue to trade and supply customers for now.

The government was under pressure to step in with another loan of £30m yesterday, and now faces further calls from Labour to take the company into public ownership.

FILE - This June 1, 2016 file photo shows a flag with a British Steel logo at the entrance to the steelworks plant in Scunthorpe, England, now owned by British Steel. Britain’s government pledged Tuesday May 21, 2019 to do its utmost to support British Steel amid reports the company is facing bankruptcy. (Anna Gowthorpe/PA via AP)
British Steel has collapsed. Photo: Anna Gowthorpe/PA via AP

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Business secretary Greg Clark said today the government had worked “tirelessly” with its owners Greybull Capital and lenders to find a solution.

But he said it would have been “unlawful” to give the kind of loan or guarantee that had been called for, saying the law required such loans had to be on a commercial basis.

Devi Shah, a partner at law firm Mayer Brown, said she hoped a new owner could still step in and save the Scunthorpe plant. “The immediate priority will be to seek a buyer, and secure the future of as many employees as possible,” he told the Guardian.

The industry has been battling many headwinds, from Chinese competition and Trump’s tariffs on EU steel to high energy bills and sterling’s plunging value.

Customers’ fears of further tariffs and higher prices had also been damaging orders at British Steel. Unions warned earlier this year that government’s plans to cut global import tariffs on steel to zero would “destroy” jobs in the event of a no-deal Brexit.

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The official receiver said: “The immediate priority following my appointment as liquidator of British Steel is to continue safe operation of the site. I appreciate that this a difficult time for the company’s employees and I want to thank them for their ongoing cooperation.”

Labour shadow business secretary Rebecca Long-Bailey called it “absolutely devastating news” for thousands of workers, their families, suppliers and communities. She called for nationalisation of the firm immediately to save the plant and a “strategically important” industry.

Freddy Khalatschi, a business recovery partner at Menzies LLP, said it marked the biggest industrial insolvency since Rover in 2005. He told the Guardian previous government loans and uncertain times made state intervention unlikely “unlikely to be a way back from the brink.”

With additional reporting by Tom Belger.