Fears are growing over the fate of the troubled tycoon Sanjeev Gupta’s speciality steel business, as nervous customers abandon it and its resources are squeezed to help his wider empire.
Mr Gupta has put the business, which employs about 750 staff at plants in South Yorkshire, up for sale as part of emergency restructuring of his sprawling GFG Alliance triggered by the collapse of his main financial backer, Greensill Capital.
However, a presentation to local MPs and the Business Secretary Kwasi Kwarteng, seen by The Telegraph, has raised concerns over the deterioration of the speciality steel business that may deter potential new owners.
Labelled “Project Fox”, the presentation shows that the unit had £80m of working capital before Covid but now has only a quarter of that and is “in need of urgent working capital to service customer commitments”.
Sources said the business has been unable to meet orders because it could not buy the scrap metal needed to make steel.
It also has staffing challenges, as Mr Gupta furloughed about 70pc of workers, with taxpayers injecting more than £7m into the business as a result. This was despite a year’s worth of orders on the books when the pandemic struck.
The speciality steel unit has resorted to only making products which are “prefunded” by customers paying in advance. Meanwhile stock is being sold off and not replaced to further boost cash.
The presentation shows the order book has now dropped to £30m. Key customers including Rolls-Royce and fellow aircraft engine maker Safran, who between them normally place £27m or orders annually, are seeking alternative foreign suppliers, it warns.
“Lost customers will not return for multiple years, with alternative sources all being non-UK.”
It adds that “customers are not placing orders (and local teams not actively recruiting orders) due to our inability to supply and nervousness about business survival”.
A source said: “Speciality steel isn’t a business that can be mothballed and restarted. The Government seems to think if it goes into administration it will be okay to start up again. Most of its work is long-term agreements with customers, but they are leaving and there are only weeks left to find an answer.”
Rotherham MP Sarah Champion said: “The question has to be asked why the speciality steel business furloughed so much of its workforce when it had such a full order book. A solution is needed now as there is not much time to save the jobs of its hundreds of employees.”
A GFG spokesman said: “GFG has stood by the speciality steel business, despite the Covid-19 crisis destroying demand for many products speciality steel makes. Like many businesses, GFG has made use of the furlough scheme.
“We have previously announced that the collapse of Greensill has required measures to be implemented to keep the business going, including requiring customers to fund orders.
“Progress is being made on all fronts and we are keeping stakeholders – including government and the workforce – informed of this process every step of the way.”