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Liberty Steel's UK operation to restart despite funding hole

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Sanjeev Gupta, owner of Liberty Steel. Photo: Russell Cheyne/Reuters
Sanjeev Gupta, owner of Liberty Steel. Photo: Russell Cheyne/Reuters

Liberty Steel UK has said it is set to restart production lines next week, despite a reported funding shortfall of £170m ($234.2m).

Over the weekend reports emerged that the UK government had declined an urgent request for cash in a move that could leave the business in danger.

Liberty Steel employs 3,000 workers at 12 sites around the UK, including in Rotherham, Motherwell and Newport. It is owned by Sanjeev Gupta's GFG Alliance.

Unions have urged the government to take the business into public ownership — representatives met with ministers on Monday afternoon to discuss its future.

Gupta's GFG Alliance said on Saturday that the bailout was necessary to pay day-to-day operating costs and absorb recent losses, in a letter to the Department of Business, Energy and Industrial Strategy (BEIS).

The government has been locked in discussions with Liberty Steel. Business secretary Kwasi Kwarteng has met with company bosses and trade unions on several occasions over the crisis at the group.

However, it emerged on Sunday the government has already rejected appeals from GFG for a £170m emergency loan.

Business Secretary Kwasi Kwarteng said the Government is “very keen” that any money given to Liberty Steel stays in the UK, citing the fact that the parent company has operations elsewhere.

“My top priority is to make sure that the jobs and the plant (are) here in the UK, and we’re looking at all sorts of plans to try and keep those going,” he said.

“We’re looking at all plans at the moment and you will appreciate that it’s commercially very sensitive.

“I think that the current owner is looking at ways of refinancing the group and I’ve been very clear that I want to see his plans worked through and before we actually go into anything in terms of a further plan to keep the jobs and the plant safe.”

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A key financial backer to Liberty's parent company GFG, Greensill Capital, filed for insolvency earlier this month.

Greensill had advanced hundreds of millions of pounds to firms linked to Sanjeev Gupta's using a state-backed coronavirus lending scheme, the Financial Times said.

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Liberty halted production lines earlier in March due to ongoing supply issues related to the demise of Greensill Capital. It says it expects to restart work on 6 April.

On Sunday, the steelmaker told Yahoo Finance UK: "While Greensill’s difficulties have created a challenging situation, we have adequate funding for our current needs.

"Discussions to secure alternative long-term funding continue to make good progress and while this takes place we have asked all of our businesses to manage cash carefully. Combined with the efficiency drive we’ve implemented over the past year this has ensured that most of our major businesses generating positive cashflows."

A Liberty spokesperson said on Tuesday: "The business is working on solutions to provide additional working capital facilities to replace the funding gap left by Greensill.

"LIBERTY Steel UK continues in constructive discussions with the UK government on measures to supplement these efforts and to highlight the importance of this business to the UK’s industrial supply chains.”

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