Sorry - I was one of those guilty of posting on health - but I also read this morning that British Steel have explicitly blamed brexit: 70% of their products are exported to either the EU or Turkey and North Africa (markets affected by Britain’s trading relationship with Europe) and “these markets had dried up, particularly since February when it became clear that a Brexit deal was not going to be finalised by 29 March”.
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In this case I am mildly sceptical that Brexit was the only problem - but, as I said above, it has certainly exacerbated the problems.
And there this, of course
According to Bloomberg: British Steel Ltd (not the famous old British Steel plc) has said it is in discussion with the government for an extra loan to solve a cash crunch caused by Brexit. The company, owned by private equity firm Greybull Capital LLP, was created by their purchase of Tata’s long steel division for £1 in 2016. It has now found itself short of cash after Brexit led the EU to suspend the allocation of free permits for the European Union’s carbon trading program to U.K. companies. The annual award is used by polluters to meet obligations in the program, but without it companies need to purchase the allowances on the open market. The money would be in addition to a 120 million pound loan granted to the company by the government to cover the cost of meeting these obligations.
The company has apparently sought a loan for £75 million and the government is drawing up contingency plans. The U.K.’s Business Department declined to comment. British Steel said in a statement : “Discussions are continuing about a package of additional support to assist the company address broader Brexit-related issues.”
A quick look at wikipedia shows that Greybull Capital LLP’s four members are two brothers, their longstanding family friend and Greybull Corporate Partner Ltd, itself owned by the two brothers. The firm has a track record in taking over companies, many ailing, and many household names which have since gone into liquidation, for example, Comet, Rileys sports bars, Monarch Holdings (the airline).
It doesn’t seem to augur well for the French Ascoval deal.
But wasn’t the whole carbon credits deal dodgy in the extreme?
Yes! British Steel could have avoided asking UK taxpayers for a £100m rescue if it had saved permits to produce carbon that it instead decided to sell in an ill-judged bet. They cashed in on allowances they were granted. The scheme requires industries to match each tonne of emissions with an “allowance” or permit. Companies are awarded a certain number for free but many end up with a greater allocation than required when emissions are cut. This is a potential source of cash as permits can be sold on the carbon market. Apparently British Steel was allocated more allowances than the total greenhouse gas output from its two main UK plants from 2013 - 2018.
When the company sold off some of its allowances, prices were much lower than current levels after a recent rally to 10-year highs. The sold-off allowances would now be worth £138m.
Peter,I am sure you are right. I have been watching this ‘deal’ and from my past experience it smelt rancid from the start. £8 million sounds a lot but in reality in heavy industry is simply pocket money but useful when purchasing a company for it’s ‘losses’ and not its profits, thus saving tax. Invariably this is a short-term proposition and NOT an investment for the future.
Sorry to say that 240 employees would rate for nothing other than a possible armtwister to a government for a grant or similar but nothing else
More validly is that there is a worldwide over-supply of steel with China if not actually ‘dumping’ certainly being ‘Highly Competitive’ on price - and consequently pissing off the USA the former ‘dumpers’.