British Steel agrees £70m rescue with Chinese firm

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British Steel Scunthorpe siteImage copyright
Reuters

British Steel is set to announce a rescue deal with China’s Jingye Group, which could safeguard up to 4,000 jobs in the UK.

Jingye Group has agreed in principle to buy British Steel for £70m.

It is understood that the government will help in the form of loan guarantees and other financial support.

British Steel has been kept running by the government since May when the company went into liquidation.

As well as employing 4,000 people at its Scunthorpe and Teeside sites, British Steel supports an additional 20,000 jobs in the supply chain.

It is believed that while Jingye Group has promised to increase production, it has also warned costs may need to be cut.

The Chinese group is aiming to increase production at Scunthorpe from 2.5 million tonnes each year to more than 3 million, according to the Financial Times.

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Since May, the company has been run at a loss by the Official Receiver – effectively a privately hired government agency.

British Steel’s previous owners, Greybull Capital, walked away saying Brexit concerns had decimated forward order books.

Turkish deal

British Steel had been in rescue talks with Ataer, which is a subsidiary of Turkey’s state military retirement scheme Oyak.

Ataer had signed a signed a preliminary agreement to buy the company in August.

However, hopes that the deal could be completed faded last month when the Official Receiver to British Steel said the parties had failed to agree terms.

The UK industry has been struggling for a number of years amid claims that China has been flooding the market with cheap steel.

It prompted US President Donald Trump to impose a 25% trade tariff on steel imports from China and the EU among others.

Jingye has 23,500 employees and as well as its main steel and iron making businesses, it is also involved in hotels, tourism and property.

The majority of British Steel’s workers are employed at its Scunthorpe plant.

Jingye’s chairman Li Ganpo recently visited British Steel’s sites and met with Scunthorpe MP Nic Dakin and Andrew Percy, representative for the Brigg and Goole constituency.

Mr Percy told the Grimsby Telegraph that he had been given assurances over the company’s future.

“They have assured us that if they do progress with this acquisition, they have every intention of investing to expand production to serve the UK and European market,” he said.

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