British Steel is broke
First big loser of Brexit?
Britain’s second-largest steel company British Steel is insolvent. The company had hoped for a financial injection from the government – but the deal failed at the last second.
Now 5,000 employees and a further 20,000 employees from suppliers may be facing job losses. British Steel is now under compulsory liquidation, which has been ordered by the court. According to the insolvency administrators, business operations are continuing. The salaries of the employees are also secured for the time being.
British Steel asked for state aid
Experts see the insolvency of the steelmaker as a reflection of the uncertain economic situation in Great Britain. The Brexit presented British Steel with an uncertain future, said CEO Gerald Reichmann in an e-mail to the employees. He also mentioned declining demand and high raw material prices as further reasons.
According to insiders, the company had still tried to avoid bankruptcy with the help of state money. The former Tata subsidiary in London asked for a loan of 30 million pounds. But the loan was cancelled.
Greg Clark, economics minister, stressed that the government had done everything to save British Steel. But the strict rules had made financing illegal. Clark promised to work closely with the insolvency administrators to secure the sites.
Financial distress for some time now
Insolvency does not only hit the direct employees hard. Employees of suppliers are now also worried about their jobs, especially in the north of England. The area is already considered structurally weak. The company’s largest steelworks is located around 290 kilometers north of London in Scunthorpe.
The steelmaker has already been in financial difficulties in recent years. Due to the high EU requirements, the British had to borrow over 120 million pounds. Only this way the requirements for the EU emissions trading system could be met.
But the tug-of-war over the British’s withdrawal from the EU seems to have claimed only one more victim.