After a breakdown in rescue talks between British Steel’s owner Greybull Capital and the government, the company has been placed in to compulsory liquidation.
Greybull said the company had “issues” relating to Brexit and were seeking financial support from the government.
The collapse of talks has placed 5,000 jobs at severe risk and endangering some 20,000 workers in the supply chain.
Scunthorpe site employs 3,000 employees and Scunthorpe has 800 workers, other workers are in the Netherlands, France and other locations across the world.
EY the accountancy firm are understood to take on the role of special manager over British Steel and will attempt to find a buyer.
Rebecca Long Bailey, Labour’s shadow business secretary said, “The government must act quickly to save this strategically important industry and the livelihoods and communities of those who work in it, by bringing British Steel into public ownership.”
Steve Turner, Unite assistant general secretary said, “Despite today’s announcement to place British Steel into official receivership, Unite will continue to engage all parties in the fight to secure the future of the company.
“We are clear that the government must now step up and step in and bring British Steel into public ownership until a buyer can be found to avoid an economic and industrial catastrophe.
“Ministers cannot wash their hands of the Brexit farce and ongoing uncertainty that has placed the company in difficulty.”
Michael Mulligan, insolvency partner at law firm, Shakespeare Martineau said, “The news that British Steel, the UK’s second biggest steel manufacturer, is to enter formal insolvency is devastating news for its workforce and supply chain. The first heavyweight casualty of Brexit, the business has been hampered by EU carbon bills, falling order numbers exacerbated by the US-China trade war – and a shifting manufacturing landscape.
“The £30m bail-out it required from the Government was relatively small change compared to the large amounts the Treasury has had to pay out to support other struggling businesses in recent years. Unfortunately, it seems, British Steel was not worth saving.
“As with all large collapses, it is the employees and supply chain who will inevitably suffer. Customers and suppliers of British Steel must act quickly to mitigate against a Carillion-style domino-effect. Making the best out of an insolvency situation requires swift and decisive action. They should take advice early.
“It is essential that directors of businesses in the supply chain are realistic and avoid burying their heads in the sand. Suppliers should open dialogue with the insolvency officeholders at the earliest opportunity and seek advice on individual directors’ duties since the collapse of a large customer like British Steel could leave them potentially trading insolvently.
” If goods are owned, retention of title clauses can prove a powerful tool for recovering them quickly and minimising the overall impact on their margins.”
Roy Rickhuss, general secretary of the community trade union said, “This news will heap more worries on workers, and everyone connected with British Steel but it will also end the uncertainty under Greybull’s ownership and must be seized as an opportunity to look for an alternative future.
“It is vital now that cool heads prevail, and all parties focus on saving the jobs.
“In these very difficult circumstances we know the workforce will continue to fight for the business as they have done for so many years.
“We would urge the management, contractors, suppliers and customers to support them in that fight for the future.”
Tim Roache, GMB general secretary said, “This is devastating news for the thousands of workers in Scunthorpe and across the UK.
“Ministers should have been ready to make use of all the options – including nationalisation – in order to save British Steel, but they either don’t care or wouldn’t take off their ideological blinkers to save hard-working people and communities.
“GMB demands urgent reassurances on what the future holds for the thousands of British Steel workers and their families.”
Freddy Khalastchi, business recovery partner at accountancy firm, Menzies LLP said, “This is a devastating development for the UK steel industry, and it will have a tsunami-like effect, impacting about 5,000 workers and many more across the supply chain. It also represents a significant cost to the taxpayer regardless of whether a white knight can be found to buy the business out of insolvency as it will undoubtedly lead to many redundancies and further company failures in associated businesses. We have not seen an insolvency on this scale in the heavy industry sector since the collapse of Rover.
“Unfortunately, the writing has been on the wall for some time and the business has been struggling to compete in a market flooded by cheap imports from China. The business has also experienced a slump in orders due to Brexit.
“In the past we might have expected the Government to intervene to protect a major industrial employer and key supplier to the UK defence sector. However, we are in uncertain times and it is not clear whether it will be possible to tap into Brexit mitigation funds in this case. The fact that British Steel recently borrowed more than £100m from the Government to pay an EU carbon bill and avoid further fines also suggests further intervention may be unlikely.
“Having failed to secure a last-ditch £30m rescue package, regrettably there is unlikely to be a way back from the brink on this occasion.”