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British Steel collapses into insolvency after rescue talks fail

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British Steel collapses into insolvency after rescue talks fail

British Steel Corp. Ltd., which owns one of the U.K.'s last steelworks in Scunthorpe, was placed in compulsory liquidation, putting 4,500 jobs directly at risk, after recent talks failed between the government and the company's owner, private equity firm Greybull Capital LLP.

The Government's Official Receiver took control of the company as part of the liquidation process following a high court decision May 22. It said in a statement that the first priority is to continue safe operation of the site while a review of the company is being undertaken. The receiver assured staff that they would continue to be paid and would be employed during the review.

Earlier in May, the government agreed to provide the company with a £120 million bridging facility to enable it to meet its EU bill for carbon dioxide emission. However, in a separate May 22 statement, Business Secretary Greg Clark said it was unlawful to provide a guarantee to the company on anything other than a commercial basis.

Clark said he will pursue "every possible step" to secure the future of the operations at Scunthorpe, Skinningrove and on Teesside.

British Steel had approached the government earlier in May for £70 million to £80 million in crisis funding to avert a collapse that would have led to thousands of job losses. It lowered the request to £30 million after owner Greybull Capital and other lenders agreed to contribute more funds.

A spokesperson for Greybull Capital, which specializes in turning around struggling businesses, told S&P Global Market Intelligence that after rescued the company in 2016, it was clear that the turnaround of British Steel was going to be a challenge but "additional blows dealt by Brexit-related issues have proven insurmountable."

In a 2018 trading update for British Steel, Greybull had flagged "increased raw material costs and fluctuating steel prices" as an ongoing challenge as well as the "dumping of cheap steel into Europe following the imposition of steel tariffs by the U.S."

Greybull bought British Steel in 2016 for £1 from India's Tata Steel Ltd.

A spokesperson at British Steel declined to comment on the court decision, referring queries to the receiver's office.