The wealthy investors who controlled British Steel when it collapsed into insolvency are to face a grilling from MPs, as government officials race to find a buyer for the stricken company.
The government’s official receiver took control of British Steel on Wednesday and is funding its operations, including the company’s Scunthorpe steelworks, which is one of the last two blast-furnace operations left in the UK.
But British Steel is facing a £95m cash shortfall by August, according to insolvency proceedings in the high court, putting the government under pressure to sell the firm quickly in order to limit the ultimate cost to taxpayers. In the meantime, MPs are already turning their attention to the causes of a financial failure that threatens 5,000 jobs directly and a further 22,000 in the supply chain.
The business select committee, chaired by Labour MP Rachel Reeves, is expected to demand to hear evidence from partners at Greybull Capital, which bought British Steel for £1 in 2016 and pledged to revive its fortunes. Founder Marc Meyohas and fellow Greybull partner Daniel Goldstein could be called to appear, while British Steel executives including boss Gerald Reichmann might also be asked to give testimony about why the company failed.
Business committee member Anna Turley, a Labour MP whose constituency contained the Redcar steelworks that closed in 2015, is understood to be particularly keen to hear from Greybull, which has collected £9m in management fees from British Steel and accrued £51m of interest on a £154m loan.
The formal announcement of an evidence session is not expected until the House of Commons sits again in early June.
But Reeves said in the House earlier this week that her committee “will want to look at what triggered the collapse of the company”. The committee is also likely to examine whether the government could have done more to help British Steel and other firms in the industry.
A poll released by YouGov on Thursday revealed that 46% of people surveyed believe the government should nationalise British Steel, while 18% say it shouldn’t, and 36% did not know.
In a report published earlier this year on the government’s industrial strategy, the committee criticised its failure to offer the steel industry a sector-specific deal to ease burdens such as energy costs and business rates.
Business minister Greg Clark, in Scunthorpe on Thursday to meet British Steel bosses, has said the government could not have granted the company’s request for an emergency £30m loan because it would have been illegal under EU state aid rules.
But Labour MP Nic Dakin, whose constituency includes the Scunthorpe steelworks, called for the government to do more to help UK steel companies by easing energy costs and ensuring they benefit from state procurement. He is understood to be gathering signatories for a letter asking Reeves’s committee to investigate. The letter will call on the committee to scrutinise the actions of Greybull in particular and whether it could emerge from the company’s insolvency having made a profit.
Speaking in the House of Commons, he referred to Scunthorpe’s steelmaking blast furnaces as “national assets”. “The strongest economies in the world have strong steel industries,” he said.
The official receiver, an officer of the Insolvency Service, which handles insolvencies for the government, is trying to find a buyer for British Steel to keep the Scunthorpe steelworks open. Pressure to find a swift resolution is expected to mount quickly, with the cost to the taxpayer rising already.
The high court judge who granted British Steel’s application for insolvency earlier this year revealed that it had £880m of debts and was due to run out of cash next week. Mr Justice Snowden said the company was facing a £15m shortfall within days, rising to £95m by August. That means taxpayers will be funding both the company’s operations and the insolvency process and will only be able to recoup the cost by selling the company or its assets.
Industrials firm Liberty House is said to be monitoring the situation, while the Financial Times named Chinese steel firm Hesteel and UK private equity group Endless as potential bidders.
The official receiver has first call on money recovered from a sale to cover its costs, followed by the firm’s bank lenders and Greybull Capital.
