Written by: Keith Tully
Reviewed: Tuesday 14th May, 2019
British Steel could be set to collapse unless it can secure loans worth in the region of £75 million from the government.
According to reports from Sky News, the company has been in communication with insolvency experts as its bosses try to access funding that would enable them to overcome their financial crisis.
The government is reportedly preparing to provide the required loans based on commercial terms but there are nonetheless concerns that the business might soon become insolvent and collapse into administration.
Statements given by British Steel describe its current financial problems as being “Brexit related”, with the company having seen a significant reduction in orders from European customers in recent quarters.
A weakening in the value of sterling has had a damaging effect on the company’s finances since the Brexit referendum in June 2016, while the trade war between the US and China has also impacted global steel prices in recent years.
A spokesperson for British Steel said: “As we have previously commented, the uncertainties around Brexit are posing challenges for all businesses including British Steel, and we are holding constructive discussions with our stakeholders on how to navigate them.
“Last month the company agreed a short-term bridge facility with government to help it meet its EU emissions obligations, and discussions are continuing about a package of additional support to assist the company address broader Brexit-related issues, whilst continuing with its investment plans.”
The short-term bridge facility referred to by British Steel saw the business borrow £100 million from the UK government in order to cover the costs of its EU carbon bill.
Had the carbon bill not been paid then British Steel could have expected to be on the receiving end of a hefty EU fine.
Around 4,500 people are employed directly by British Steel and there are serious concerns about their prospects given the seriousness of the company’s financial problems.
But the collapse of the steel producer would also be a major worry for the smaller businesses within its supply chain, which are believed to collectively employ in the region of 20,000 people.