The owners of Britain’s second largest steelmaker are urgently seeking a package of taxpayer financial support amid renewed fears that thousands of industrial jobs will be lost in the north of England.
Sky News has learned that Jingye Group, which bought British Steel out of bankruptcy in 2020, has told ministers the company’s two blast furnaces are unlikely to be viable without government help.
British Steel, which is headquartered in Scunthorpe in north Lincolnshire, employs around 4,000 people, with thousands more jobs in its supply chain dependent on the company.
Jingye’s request is a major headache for Jacob Rees-Mogg, the new Business Secretary, on the eve of the Conservative Party’s annual conference in Birmingham.
While the exact extent of the support the Chinese industrial giant was seeking this weekend was unclear, insiders have suggested that “hundreds of millions of pounds” would be needed to keep Scunthorpe’s blast furnaces running.
It was also unclear whether any financial subsidy would take the form of a loan or grant.
An insider said Jingye is ready to lay off thousands of people if ministers reject her request.
According to the insider, the company then plans to import steel from China to be rolled at British Steel’s UK sites.
This weekend the government confirmed it was “working closely with the company to find the best way forward to secure a more sustainable future”.
“We recognize that businesses are feeling the impact of high global energy prices, particularly steelmakers, which is why we have announced the Energy Bill Relief Scheme to bring costs down,” said a spokesman for the Department of Corporate, Energy and Industrial Strategy.
“This comes on top of the extensive support we have provided to the steel sector as a whole to help with energy costs, which have been worth more than £780m since 2013.”
Industrial energy consumers have complained for months that rising prices are threatening their ability to keep investing, with the duration and cost of a recently announced government subsidy program remaining uncertain.
For Mr Rees-Mogg, who took over as business secretary less than a month ago, a decision on government support represents a politically undesirable choice.
Failure to provide government funding and a significant number of job losses would undermine a key tenet of the “leveling” strategy that has become a doctrine of the Boris Johnson administration.
However, an agreement to provide substantial taxpayer money to a Chinese-owned company would almost certainly provoke outrage from Beijing’s Tory critics.
China’s role in global steel production after years of international trade disputes over dumping would make any subsidy even more controversial.
A spokesman for British Steel said: “We are investing hundreds of millions of pounds in our long-term future but like most other businesses we face a significant challenge from the economic slowdown, rising inflation and exceptionally high energy and carbon prices.
“We welcome the UK Government’s recent announcement to reduce energy costs for businesses and remain in dialogue with the authorities to ensure we compete on an equal footing with our global competitors.”
It is the second time in just over three years that serious doubts have been raised about British Steel’s future.
In May 2019, the liquidator was appointed to take control of the company after negotiations for a £30million emergency government loan broke down.
British Steel was formed in 2016 when India’s Tata Steel sold the company to Greybull Capital, an investment firm, for £1.
As part of the deal that gave Jingye ownership of British Steel, the Chinese group said it would invest £1.2 billion to modernize the company over the next decade.
Jingye’s acquisition of the company, which was completed in Spring 2020, was welcomed by Mr Johnson as securing the long-term future of steel production in the UK’s industrial core areas.
“The sounds of these steel mills have long echoed throughout Yorkshire and the Humber and the North East,” he said.
“Today, as British Steel takes its next steps under Jingye’s leadership, we can be confident that they will be meaningful for decades to come.
“I would like to thank everyone at British Steel in Scunthorpe, Skinningrove and on Teesside for their dedication and resilience in making the business a success over the past year.
“Jingye’s commitment to invest £1.2 billion in the company is a welcome boost that will not only secure thousands of jobs but will also ensure British Steel continues to thrive.”
Tata, which owns the huge Port Talbot steelworks in Wales, remains Britain’s largest steelmaker.
It, too, has sought government support in recent months, with the Financial Times reporting in July that the Indian-owned group has received $1.5 billion in taxpayer dollars.
Liberty Steel, the industry’s third-biggest player, was forced to turn down an offer of £170m in state aid from Kwasi Kwarteng, then Business Secretary, last year.
As chancellor, Mr. Kwarteng will play a key role in deciding the fate of Jingye’s request for assistance.
It was unclear this weekend how quickly ministers would make a decision or whether advisors on both sides were brought in to help with the negotiations.
A government insider pointed out that a number of support programs for heavy industry are still operational.
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