The Labour party has called for the government to step in to save Liberty Steel from an insolvency that could threaten thousands of supply chain jobs if owner Sanjeev Gupta fails to find a new lender to prop up his metals empire.
Gupta is scrambling to refinance his companies, after the collapse of Greensill Capital, which lent him as much as $5bn (£3.6bn). The collapse has raised concerns over the future of companies under Gupta’s GFG umbrella, including about 3,000 Liberty Steel workers in the UK as well as about 35,000 workers across the world.
The Conservative government is preparing to intervene to save UK steel jobs only if Liberty Steel fails to refinance and becomes insolvent. Labour has said that would be too late for as many as 3,300 workers in companies that supply Liberty. In an insolvency suppliers’ bills are often left unpaid, even if a business’s assets are later bought.
Lucy Powell, Labour’s shadow business minister, said a government commitment to stepping in before insolvency could allow suppliers, ranging from cleaners to makers of machine components, to continue to deal with Liberty without fearing losses.
“The people who lose out most from the option of becoming insolvent are the supply chain,” Powell said. “If the government were to indicate this were an option that would inject confidence into the supply chain.”
Government sources have indicated that a leading option for a potential Liberty collapse is to copy the British Steel rescue. After British Steel entered liquidation in 2019 an official receiver was appointed to run it with a government indemnity until a buyer, China’s Jingye, was found.
The whole process cost the UK government nearly £600m. However, Chris McDonald, chief executive of the Materials Processing Institute, a steel research centre, said the supply chain also bore costs running to hundreds of millions of pounds. McDonald has said a Liberty collapse could cost its suppliers £350m.
“What was slightly forgotten about [with British Steel] is that as soon as the business falls into insolvency the supply chain takes a hit,” McDonald said. “A lot of those are small businesses.”
It is understood that Labour’s preference would be for GFG to find a new lender, preventing the need for any government intervention. The party has previously called for the government to commit to using UK steel for defence and national infrastructure to help the industry.
Any attempt to rescue the various Liberty Steel plants, including Rotherham and Stocksbridge in South Yorkshire, could be complicated by the labyrinthine corporate structure used by Gupta’s companies.
Business secretary Kwasi Kwarteng previously turned down a request from Gupta for a £170m loan because he did not receive guarantees that it would be used exclusively to support UK assets, he told MPs at a committee hearing last week.