Can Turkish army fund REALLY be trusted with our steel?
Buyer is run by general and has ties to authoritarian regime
For British Steel, it must have looked like an unmissable second chance for a once-proud business on the brink of collapse.
After weeks of desperately searching for a white knight, the company seems to have finally found its unlikely saviour in oyak, a Turkish military pension fund.
In just two months the ailing metals firm, which has been on taxpayer-funded life support since running out of money in May, will be bought for £70m, hopefully safeguarding almost 5,000 jobs.
But amid the euphoria over the rescue, there are questions over whether this vital national asset should be allowed to fall into the hands of a foreign power without any safeguards in place – particularly one which seems to be drifting ever further away from the West.
Tory MP Julian Lewis, chairman of the Defence Select Committee in Parliament, spoke for many this week when he said: ‘No industry with a strong defence dimension should pass out of the control of British firms and jurisdiction.’
oyak looks after the retirement savings of 360,000 current and former Turkish soldiers but is theoretically independent from the increasingly authoritarian government. Its chairman, Mehmet Tas, was a major general earlier in the reign of Turkey’s autocratic leader recep Tayyip Erdogan.
And this May, oyak bosses hosted the Turkish defence minister and head of armed forces at its annual meeting. Meanwhile, Erdogan has spent the last two years cosying up to russian president Vladimir Putin over Syria, as the Turkish economy fights recession in the aftermath of a currency crisis. Although Turkey remains a memby ber of Nato alongside the US and UK, Putin and Erdogan have grown increasingly close over the past two years and have held frequent talks over the future of war-torn Syria, where they officially support opposite sides.
And Erdogan has shocked many observers with his dictatorial behaviour, locking up dissidents and journalists and sacking the head of the country’s central bank over a slide in the lira.
In a fiery speech last year, he even urged Turks to sell their gold and dollars to shore up the country’s currency.
oyak has also raised eyebrows due to its tempestuous past.
In 2012, it was accused of corruption by the Turkish parliament, for misusing government construction permits, and in 2018 a former chairman – Yildirim Turker – another retired general, was sentenced to life imprisonment for his involvement in a 1997 military coup.
Despite these concerns, British Business Secretary Andrea Leadsom has stood by the move to pick the Turkish military pension fund as British Steel’s preferred buyer, calling it an ‘ important and positive step’, and reassuring MPs in steel constituencies.
To sell British Steel under such circumstances shows the lengths to which the Government will go to protect steelworkers’ jobs and neutralise potential criticism ahead of a looming election. Ministers have so far shown only a fleeting concern over the Turkish question.
one official involved in the talks said: ‘There was never any feeling or sight of Turkish political interest, but then I’m not saying there wouldn’t be if the deal came off.’
In response, oyak has said that it is run by independent managers and that it does not receive contributions from the Turkish government.
Looking beyond geopolitics, the company seems to be a promising bidder. It is a far cry from Greybull Capital, the super-rich financier which took British Steel into administration in May.
Firstly, oyak has owned Erdemir, Turkey’s biggest steel producer, since 2005, and is a serious player in the European industry. It is also a pension fund with assets of £15bn, and is seen as a long-term investor.
The fund already has numerous industrial interests in mining, cement, energy and car making across Europe.
EARLYsigns also suggest bosses are willing to put money behind their ambition to modernise Scunthorpe’s blast furnaces, offering a reported £900m to help make the UK its laboratory for high-tech, hydrogen-fuelled steel production.
oyak also said it wants to boost output from 2.8m to 3.2m tonnes per year in the process.
But this is not the first time the fanfare has been sounded to celebrate the dawn of a new future for British Steel.
The Greybull deal was hailed as a ‘new start, and a new chapter’ when it was completed in June 2016.
Three years later, the company’s erstwhile private equity rescuers were themselves asking for bailouts while stripping up to £20m out of the company each year in debt interest and fees. Last week, trade unions gave a lukewarm response to the Turkish bidders, as oyak refused to rule out several hundred job losses.
The GMB union said the continued uncertainty meant workers are staring redundancy in the face, while Unite said it is ‘a matter of urgency’
that oyak reveals its plans. Cutbacks would represent a brutal blow, especially after ministers’ warm reception of the Turkish rescuers.
one of the reasons critics doubt oyak’s promises is its decision to move a separate chemicals factory from Tyneside to Turkey and Austria, blaming Brexit uncertainty.
oyak said the Chemson factory, which makes additives used in PVC plastics, will be closed in September, leading to 64 redundancies.
There are also questions over the viability of the £15bn pension fund’s hydrogen fuel plans, which experts have warned are extremely ambitious.
richard Warren, of industry association UK Steel, suggested the increased energy usage could add up to 30pc to the cost of production. He said: ‘You would ask how British Steel would remain competitive.’
The answer may be a burst of taxpayers’ money. A £ 300m sweetener has reportedly been offered, but the Turks will probably demand more as formal negotiations get under way, experts said.
British Steel’s prospective Turkish owners have already been hustled in to meet Boris Johnson, shortly before he became Prime Minister.
Government insiders said the potential buyers gave a ‘very good’ pitch. Decision-makers continue to be impressed by their ‘energetic, ambitious and positive’ vision for the industry.
In an industry that for decades has only known setbacks, the fund’s optimism is certainly attractive and is likely to have appealed to the Prime Minister’s own vision for post-Brexit Britain.
But the Government, keen to learn the lessons from Greybull, will know that it takes more than words and promises to run a successful company.
Foreign buyers so often claim they are long-term investors, who will keep operations in the UK and protect jobs, while the reality proves different.
Now ministers have two months to grind out the details and put assurances in place that British Steel’s long-suffering workers and suppliers so desperately seek. And questions over oyak’s links to the regime in Ankara remain.