SHARKS WHO’VE TRASHED THREE BRITISH ICONS
The title British Steel evokes the magnificent days of this country’s industrial might. The collapse into insolvency is a betrayal of the legacy of the great Victorians who produced almost half of the world’s pig iron.
It is a disgrace that the future of steel- making in Scunthorpe and as many as 20,000 associated jobs are dependent on the whim of a ruthless private equity partnership with a history of forcing companies that it has bought into insolvency and administration.
In addition, successive secretaries of state for business – such as Sajid Javid and Greg Clark – have failed to do enough to help put this vital industry on a financially sustainable footing.
It is not simply a question of steelworkers’ jobs being at stake, but at risk is a supply chain that provides raw materials for the motor industry and a host of infrastructure projects.
Also, steel is essential for national security and the defence industry. Without a thriving and advanced steel-making capacity, the UK would be dependent on imports from countries such as China and risks having to pay over the odds or suffer by being dragged into the trade war between the US and China.
It is no exaggeration to say that to lose our already diminished steel- making capacity would be a catastrophe.
The Government and the Scunthorpe plant’s former owners, India’s Tata Steel europe, made a fundamental error in allowing private equity firm Greybull to acquire British Steel in the first place.
Greybull had a notorious reputation for buying companies cheaply, milking them for cash and profits, and then abandoning them if business went bad.
Under Greybull, Monarch Airlines fell into administration in 2017, leaving 110,000 passengers stranded and taxpayers footing a £60million bill for the biggest repatriation in airline history.
Then there was electrical retailer Comet. With fellow private equity outfit OpCapita, Greybull bought the chain for just £2. A year later Comet collapsed, leaving taxpayers to fund redundancy payments of £23million and an unpaid tax bill of £26.4million.
When I met Greybull’s Marc Meyohas – who co-founded the partnership with his brother Nathaniel – after the Monarch collapse he refused to take any personal responsibility. he argued that Greybull was performing a heroic role of buying troubled firms at knockdown prices and he would invest capital to see if they could be resuscitated. however, the notion that it is a philanthropic outfit interested in the fate of the workforce and the future of British industry is humbug.
Sadly, this is just the latest disaster in the recent history of British steel-making.
In 2007, Tata bought the AngloDutch company Corus. What looked like a thriving business quickly became a burden as the financial crash descended. The global economy has stuttered ever since.
DEMAND for the highquality steel dropped and european steel-making in general was hit hard by cheap imports from China.
In 2014, Tata sought new owners for the Scunthorpe steelworks, two mills on Teesside and other assets. It wanted to concentrate production at Port Talbot in South Wales.
Greybull – with its eye for a bargain – stepped in. A panicking Government was seduced by promises to restore the marque to its former greatness. At first, Greybull was true to its word, assembling a £400million investment package from banks and securing a credit line of £90million for operating expenses.
But analysis shows that little of the money that Greybull spent was equity. It is estimated that the French-born, Manchester-based Meyohas brothers put in just £20million of family funds. Despite such a modest investment, Greybull took £6million in fees and charged £17million a
year for loans funnelled through a Jersey-based parent company, Olympus Steel.
The crunch for British Steel came on March 29, the day Britain was scheduled to leave the eU. As is the case with many energy-intensive businesses, it relies for a large amount of income from a complicated system of credits based on their pollution record.
Under normal circumstances, £110million would have come from Brussels. But Britain’s half in-and- out status meant the Government had to pay the bill.
The truth, though, is that Greybull had bigger problems. World demand for steel had been falling, prices had dropped and uncertainty over Brexit had led foreign buyers to shy away.
To carry on trading, Greybull demanded a second bailout of £70million (later reduced), otherwise it threatened that it would place British Steel into administration.
The issue of another government bail-out has been complicated by the presence of Greybull. No politician wants to be accused of rescuing unscrupulous owners from their mistakes.
The brutal fact is that we are paying heavily for allowing the steel industry to fall first into overseas hands and then for it to splinter into several parts with a private equity partnership commanding such a vital role.
Ultimately, what we are witnessing is the result of having a government that doesn’t have a coherent industrial strategy and which is totally ill-prepared for life post-Brexit.