Wednesday, April 21, 2021

News: Call for Government to step in before Liberty Steel becomes insolvent


Shadow Business Minister, Lucy Powell MP, is today calling on the Government to step in before Liberty Steel becomes insolvent.

The Government has previously said that it was monitoring the issues at Liberty Steel "extremely closely" but was unable to say what support it may offer as the steelmaker attempts to refinance.

The company, part of Sanjeev Gupta's GFG Alliance, employs hundreds of staff in South Yorkshire, including in Rotherham. GFG Alliance has been linked to Greensill, a specialist in invoice financing that operates with less regulation than the traditional banks and that is now in administration.

Last month unions were told that the group intends to secure a refinancing of the debt to provide the business with the necessary liquidity going forward.

The Government has confirmed that it has rejected GFG's request for £170m in financial support.

Business Secretary, Kwasi Kwarteng said last week: "Liberty Steel sits under a company that is called GFG. To spell out what GFG is, that is the Gupta Family Group. It was the Gupta Family Group that asked for the money. If you look into the Gupta Family Group, it is not the most transparent organisation. It also has assets all over the world and employs something like 35,000 people all over the world.

"If the Gupta Family Group asks the British Government to give £170m of taxpayers’ money, it is incumbent on Ministers and officials to be sure, have some degree of surety, that that money will stay in the UK and will not simply be disbursed across the Gupta Family Group’s other steel manufacturing assets across the world. As far as I could understand, we did not have those guarantees. It was a very opaque structure and there was reluctance to give the group the money.

"I am very keen to see that these assets, which are good assets, and the company continue to operate. In this instance now, we cannot strip Liberty Steel from the wider group under which it sits. As Mr Gupta says, they are billions and billions of pounds in debt. This group is completely opaque as far as its financial position is concerned. We do not know the full extent of its liabilities.

"As officials and Ministers, we have a responsibility to taxpayers not to simply sign off £170m without any knowledge of where that money might eventually go. As I understand it, there are creditors already trying to get some sort of recourse from the Gupta Family Group. We had no idea where this money would end up and I think we came to the right decision in that particular instance."

When British Steel entered liquidation in 2019, the government provided the Official Receiver with an indemnity to cover the costs which enabled the company to continue to trade until it was bought by Jingye Group, a leading Chinese steelmaker, in 2020. The indemnity is reported to have cost in the region of £500m.

Labour has raised concerns over the impact of insolvency on 3,300 jobs in the supply chain. Rotherham MP Sarah Champion has estimated that for every steel worker, there are another 4.8 people employed in the supply chain.

Labour’s Shadow Minister for Business and Consumers Lucy Powell MP, said: "Liberty Steel plants support thousands of steel and supply jobs in towns across the country, and are of vital strategic importance for our economic prosperity and national security. Ministers are not spectators, they must intervene early to save these plants, or we’ll see businesses in places like Hartlepool, Scunthorpe, Rotherham, Stocksbridge and Newport go bust as invoices go unpaid.

"Steel communities have helped to build Britain. The Conservatives must now back British steel to secure its future, with real action after ten years of neglect. This means a proper plan to decarbonise the sector, boost business competitiveness, and ensure UK government infrastructure projects use British steel in their projects."

Images: Liberty House


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