Due to increasing concerns over the future of thousands of industrial jobs in the north of England, the owners of Britain’s second-largest steel manufacturer are requesting an urgent package of financial assistance from taxpayers.
According to reports, Jingye Group, which saved British Steel from bankruptcy in 2020 by purchasing the company, has informed ministers that the company’s two blast furnaces are unlikely to be profitable without government assistance.
About 4000 people are employed by British Steel, which has its headquarters in Scunthorpe, north Lincolnshire, and thousands more work for the company’s suppliers.
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On the eve of the Conservative Party’s annual conference in Birmingham, Jacob Rees-Mogg, the new business secretary, is dealing with a big dilemma because of Jingye’s request.
Industrial energy users have been complaining for months that rising prices are endangering their capacity to continue investing, and that the length and cost of a recently announced government subsidy scheme are still unknown.
A choice regarding government funding provides Mr. Rees-Mogg, who assumed his position as business secretary less than a month ago, with a range of politically unfavourable options.
A crucial aspect of the “levelling-up” policy, which became a tenet of Boris Johnson’s administration, would be undermined if no public financing is made available and sizable numbers of jobs are eliminated.
However, a deal to grant significant taxpayer support to a Chinese-owned company would almost likely infuriate Tory critics of Beijing.
After years of international trade disputes over dumping, China’s contribution to world steel production would make any subsidies much more divisive.
After discussions for an emergency £30 million government loan broke down, the Official Receiver was appointed in May 2019 to take control of the company.
British Steel was established in 2016 after Indian company Tata Steel sold its operations to investment firm Greybull Capital for £1.
In the agreement that secured Jingye’s ownership of British Steel, the Chinese company promised to invest £1.2 billion in the company’s modernisation during the ensuing ten years.
Mr. Johnson praised Jingye’s acquisition of the business, which was finalised in the spring of 2020, as securing the long-term viability of steel production in Britain’s industrial heartlands.
The largest producer of steel in the United Kingdom is still Tata, which operates the enormous Port Talbot Steelworks in Wales.
The Financial Times reported in July that the Indian-owned firm was looking for £1.5 billion in taxpayer financing to help it decarbonise its operations. It has also recently requested government assistance.
The third-largest company in the sector, Liberty Steel, had a request for £170 million in state help turned down by Kwasi Kwarteng, the then-business secretary, last year.
Mr. Kwarteng will play a significant role in deciding the outcome of Jingye’s request for support in his capacity as chancellor.
It was unclear this weekend how quickly ministers would make a decision or whether advisors had been brought in to assist with negotiations on either side. A government insider noted that a number of support programmes for heavy industries were still in place.