The UK's second-largest steelmaker, British Steel, will fall into administration if the government fails to provide £30m in emergency funding by late Tuesday, Reuters reported.
Greybull Capital has been charged with restructuring businesses such as Tata Steel and Monarch Airlines, paid Tata £1 in 2016 to acquire the company now renamed British Steel. Monarch Airlines also fell into administration in October 2017 amid a period of financial turmoil.said on Tuesday following negotiations.
But if negotiators fail to approve the loan by Tuesday afternoon, administration firm EY may be nominated as the owner of British Steel by Wednesday, the source stated.
British Steel has declined to comment, but many on social media have offered their thoughts on the coming collapse. UK Labour and opposition leader Jeremy Corbyn said that a British Steel collapse would be "devastating for thousands of jobs in Scunthorpe", whilst George Galloway demanded that the UK steel industry to become nationalised "without compensation of British Steel", adding that it was a "mark of shame" on the UK.
— Jeremy Corbyn (@jeremycorbyn) May 21, 2019
British Steel latest >> Unite: “It is vital that Greybull reaches a deal with the government. Thousands of British Steel jobs and many more in the supply chain depend on it. Unite will be urgently speaking to government ministers.” https://t.co/NYmNVHb96o— Unite the union (@unitetheunion) May 21, 2019
According to a second source, British Steel lost the support of one of its four major lenders on Tuesday, with others already exiting negotiations.
"The (company's) cash was not big enough to sustain even one bank pulling the plug," the source said.
UK business minister Andrew Stephenson said during an urgent question in Commons that speculation over British Steel "will no doubt be creating uncertainty for those employed by the company," adding that he would offer assurances that the UK "government will leave no stone unturned in its support for the steel industry".
— Bryan Smith (@BpsmithUk) May 21, 2019
"We recognise that global economic considerations continue to be challenging for the industry, which is why the government is working with the sector, with unions and with the devolved administrations to support a sustainable, productive and modern UK steel sector," Mr Stephenson said.
The news comes after plans to merge German multinational firm Thyssenkrupp and Indian steelmaker Tata Steel fell through, which would have led to Europe's second-largest steelmaking firm after ArcelorMittal.
If talks fail, British Steel's collapse could lead to industry-wide fragmentation, leading the UK economy vulnerable to slide further into recession, in addition to threats to the UK's major steelworking factories in Port Talbot in Wales, which is owned by Tata Steel. Britain's steel firms pay some of the highest tax rates across Europe, leading to further uncertainty due to the UK's withdrawal from the European Union. UK firms have been hit by profit losses in recent years, with His Majesty's Voice, Debenhams, Monarch Airlines, Flybe and others and others falling into administration or requiring buyers to save their firms.