Parliament to probe UK steel industry viability, Liberty finances

London — The UK Parliament's Business, Energy and Industrial Strategy (BEIS) Committee has launched an inquiry to examine the government's approach to supporting the UK steel industry, its long-term viability amid global overcapacity, and in particular, the case of Liberty Steel, BEIS confirmed April 28.

The committee has invited submissions by May 14 to be considered at a meeting later in May.

Launch of the parliamentary enquiry follows the collapse into administration on March 8 of supply chain finance firm Greensill Capital, the principal financial backer of GFG Alliance, the parent company of Liberty Steel, the third largest steel manufacturer in the UK.

"The collapse of Greensill puts 5,000 jobs at risk at Liberty Steel and other firms," a UK Parliament committee statement said.

Liberty Steel has nine sites across England, Scotland and Wales, producing flat and long products. Its UK rolled products capacity is around 3 million mt/year.

"LIBERTY Steel will fully support the committee's inquiry and looks forward to contributing to the committee's work to secure a sustainable future for the U.K. steel industry and the skilled jobs, local communities and critical supply chains which depend on it, " a Liberty Steel spokesperson said in an emailed statement.

Following Greensill's collapse, GFG Alliance asked its operations worldwide to be prudent with cash and said some of Liberty Steel's UK operations were operating "intermittently." Concerns were raised over the continuity of raw materials supplies due to potential payment issues. The company announced April 6 that its 1.3 million mt/year crude steel Rotherham mill and related specialty steel plants in the north of the UK, understood to be its most impacted due to a slump in aerospace sector orders during the coronavirus pandemic, had restarted partial production.

GFG Alliance executive chairman Sanjeev Gupta has pledged on various occasions that none of the group's works in the UK will close down and that efforts are underway to restructure group funding.

Still, three French units of Alvance Aluminium, GFG Alliance's aluminum subsidiary, entered judicial administration last week. Indications are that at least one, the Poitou iron foundry, may face permanent closure.

Taxpayer exposure 'more than GBP1 billion'

The UK Parliament committee stated that UK taxpayers are reported to be exposed to more than GBP1 billion ($1.39 billion) of debt from the collapse of Greensill Capital via three government guarantees, including a state-backed coronavirus lending scheme, "which enabled Greensill to advance hundreds of millions of pounds to companies linked to GFG Alliance."

On March 28, the government rejected a request by Gupta for a GBP170 million loan to support Liberty Steel. According to the parliamentary committee's statement, the funds were refused due to concerns over GFG Alliance's "opaque accounting procedures. This raises questions about the effectiveness of auditing and corporate governance regulations, and about the risks posed to UK industry by high-risk financing methods," it said.

The statement added that the UK steel industry has faced serious challenges for many years, particularly due to the excess of steel on the international market which depressed prices for several years, resulting in plant closures and staff lay-offs during the 2015-16 steel industry crisis.

"The sector is also grappling with the Government's ambitious target of 2035 to achieve net zero emissions in relation to steel production," it said.