British Steel rescued by Jingye deal

12 March 2020 3 min. read
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10 months after administrators were first appointed at British Steel, the organisation has been sold to China-based steelmaker Jingye. Big Four firm EY oversaw the sale, which safeguards around 3,000 jobs.

Originating from the nationalised British Steel Corporation, metal producer British Steel was privatised in 1988. The premise of its sell-off was that this would lead to increased efficiency and improved service. As with the many of the entities which the UK Government has since sold, however, the opposite occurred, and the privatised group has floundered for the three decades since.

British Steel merged with a Dutch company to form Corus in 1999, but the combined entity was absorbed less than a decade later by Indian steel operator Tata. Less than another 10 years had passed before Tata began to ramp up its own efforts to offload the property, which faced a number of issues. This included a large pension scheme – one of the biggest in the UK – which Tata unceremoniously dumped to apparently avoid its British wing becoming insolvent.

British Steel rescued by Jingye deal

With British Steel still struggling, Greybull Capital stepped in. Greybull specialises in trying to turn around distressed businesses, and completed a deal for just £1, saving the company from collapse. The entity resumed its name of British Steel, and at the time no jobs were shed – but citing a weak pound and euro, British Steel soon downsized its UK workforce by almost 10%, laying off 400 workers before raising a £90 million asset-backed finance injection from White Oak Global Advisors, in a bid to once again stay afloat.

Those efforts to avoid disaster were ultimately not enough, however. As was the case with Greybull-owned airline Monarch – also purchased for £1 in October 2014 – British Steel has collapsed three years after its purchase. Big Four firm EY was appointed to oversee the firm’s sale, telling the BBC at the time that its appointment followed "a number of weeks" of negotiations by management with the company's various stakeholders, which “regrettably… were unable to secure a solution before the company's funding resources were exhausted."

Now, 10 months later, a China-based steelmaker has finally completed its buyout of British Steel. According to a statement from the firm, it has acquired British Steel’s UK and Dutch assets from the official receiver and confirmed it planned to invest £1.2 billion in the company. Roughly 3,200 staff have been offered contracts, while 400 were told this week that they would be made redundant when the sale closes.

Jingye had said last week it would buy British Steel‘s main plant in Scunthorpe, even though it had not had a reply from the French government about a French unit seen as a potential obstacle to the deal. France regards British Steel‘s operations there as a strategic activity because it supplies the railway company SNCF. Although its Government said last week four bidders had expressed interest in buying that unit, Jingye has also indicated it still hopes to buy the French operations at Hayange.