What you need to understand about the situation
The Business Secretary Greg Clark is facing one of those days.
British Steel, a name with as deep a symbolism and meaning as if it was stamped on one of their girders, required urgent financial assistance in the form of a £75m bridging loan to help keep the company operating at normal capacity.
They have secured backing from shareholders and lenders to continue operations until at least the end of the month but discussions with the government are set to continue.
British Steel said: “As the business navigates the significant uncertainties caused by Brexit, and explores options to strengthen the business for the long term, we are pleased to confirm that we have the required liquidity while we work towards a permanent solution.”
The business’ owners, Greybull Capital, claimed that without additional funding then the whole company including the Scunthorpe Steelworks which directly employs 4,500 workers with a further 22,000 dependent jobs further down the supply chain could be in jeopardy.
Scunthorpe is the largest British Steel manufacturing facility in England making wire rods and steel for the construction and rail industries. There are also smaller specialist facilities in Teesside concentrating on special profiles and a research and development unit in Rotherham along with regional storage and distribution hubs. The company also has two smaller manufacturing sites in France and Holland.
The request comes less than a fortnight after the government had already supplied the company with an emergency £120m loan to cover an EU bill for its carbon dioxide emissions as part of the EU emissions trading scheme.
The other options facing the government are no less palatable. If they didn’t supply the funding and the business failed then it would be hard to make a rational case to an emotional audience of voters just before a European election.
Similarly if they decided to nationalise the company as a matter of strategic interest either partly or wholly, they would be handing their main political opponents a publicity gift by endorsing one of the main planks of their economic strategy – one that the government would be strongly campaigning against in any forthcoming campaign.
Prime Minister Theresa May didn’t comment directly but conceded that it was a worrying time for employees and their families.
Steeling themselves for worse
Greybull Capital purchased British Steel in 2016 for the nominal sum of £1 from previous owners Tata Steel. Regardless of the performance of British Steel, Greybull have made a £20m profit from it in management fees and loan interest they have advanced to it.
The company has previously been involved in attempted rescues of Monarch Airlines, Rileys snooker halls and retailers the Comet Group, Game Group and My Local although all eventually closed.
When Monarch went into administration in 2017 with 1,900 workers being made redundant and over 70,000 holidaymakers that had to be repatriated, Greybull was named as the top creditor eventually receiving £60m from the administration. They also collected £50m from the administration of Comet.
Tough decisions have to be taken in every business and usually the sooner the better but in every administration, as well as assets and liabilities to be taken into account, there are also people just doing their jobs and getting on with their lives.
It’s something we strongly bear in mind with every client we work with when they’re exploring their options to rescue, restructure or wind down their company.