5,000 steel industry jobs at risk following Greensill collapse

15 March 2021 Consultancy.uk 3 min. read

The collapse of Greensill Capital into administration has placed thousands of jobs in the UK’s steel industry in jeopardy. Sanjeev Gupta’s Liberty Steel had been dependent on the private equity firm for investment – and a UK trade union has now called on the steel magnate to clarify the future of his firm.

Founded in 2011 by Australian entrepreneur Lex Greensill, Greensill Capital is a financial services company based in the UK, focused on the provision of supply chain financing and related services. Last year the company had hoped to float on the stock market with a $7 billion valuation, however a spectacular fall from grace has now seen the firm install administrators to oversee the sale of its assets.

Grant Thornton insolvency practitioners Chris Laverty, Trevor O'Sullivan and Will Stagg have been appointed as joint administrators of Greensill Capital and Greensill Capital Management Company. A statement from the company announced that they “are in continued discussion with an interested party in relation to the purchase of certain Greensill Capital assets,” however concern has quickly mounted regarding what this move means for firms previously backed by Greensill Capital.

5,000 steel industry jobs at risk following Greensill collapse

Most prominently, that includes steel tycoon Sanjeev Gupta's sprawling empire, which includes Liberty Steel. Greensill was the main lender to Gupta’s businesses, and in a court filing, Greensill has revealed that Gupta's operations were in "financial difficulty" and defaulting on debt. Gupta declined to comment on the claims, while his umbrella business GFG Alliance later stated that it had adequate funding for its current needs, however this has not assuaged fears that the empire faces an uncertain future.

Liberty owns 12 steel plants in the UK including in Rotherham, Motherwell, Stocksbridge, Newport and Hartlepool. Fearing that 5,000 jobs may now be at risk, Union officials have called for crisis talks with Gupta and the firm’s ownership.

A statement from the Community union said, "Sanjeev Gupta needs to tell us exactly what the administration means for Liberty's UK businesses and how he plans to protect jobs. The future of Liberty's strategic steel assets must be secured and we are ready to work with all stakeholders to find a solution."

Many of Liberty Steel's assets were part of Tata Steel's UK business, until they changed hands for £100 million in 2017. When Gupta's GFG Alliance snapped them up, the man once labelled “the saviour of steel” was hailed as saving thousands of UK jobs. However, his empire has often been criticised for its complicated structure and lack of transparent accounting – something which tied to the circumstances that led his key funders to fold so spectacularly.

As reported by The Wall Street Journal, Credit Suisse froze $10 billion of investment funds that fuelled Greensill Capital, as the Swiss bank was apparently concerned about the extent of the connection between the company and Gupta. Credit Suisse later said it had taken the step in early March "to protect the interests of all investors," with the financial institution adding that some of the fund's assets "are currently subject to significant uncertainties regarding their accurate valuation."