Global Business

British Steel Goes Insolvent, Blaming Brexit

"There are a number of reasons why [British Steel's] turnaround has been very badly blown off course but the main one is Brexit,” its owner says.
Matthew HellerMay 23, 2019
British Steel Goes Insolvent, Blaming Brexit

British Steel, the U.K.’s second-largest steelmaker, has gone into liquidation, blaming uncertainty over Brexit for its demise.

The British government is now in control of the company after declining to provide it with a 30 million pound bailout and the search for a buyer has already begun.

British Steel’s private-equity owner, Greybull Capital, said its turnaround strategy was “starting to show success” but had been undermined by the U.K.’s still unresolved effort to leave the European Union.

“There are a number of reasons why the turnaround has been very badly blown off course but the main one is Brexit,” Greybull managing partner Marc Meyohas told the Financial Times, adding that British Steel’s “customer base has lost confidence in our long-term ability to be their supplier because of Brexit.”

According to one estimate, Brexit has already been costing the U.K. economy 600 million pounds a week. British Steel employs 5,000 people and its collapse could threaten another 20,000 jobs at suppliers.

The company’s insolvency makes it “the biggest corporate victim yet of the fallout from Brexit,” the Evening Standard said.

British Steel’s request for a bailout came only three weeks after the U.K. government provided it with a 120 million pound bridging loan to meet EU emission rules. Business minister Greg Clark said a rescue package “on the terms of any proposals that the company or any other party has made” would have been illegal.

As the Guardian reports, “The U.K. steel industry has been in decline for some time because of a variety of factors such as overcapacity in EU steelmaking and Chinese state-subsidized firms flooding the global market with cheap product.”

While Brexit was not the only cause of British Steel’s collapse, it was “very important,” the Guardian said, in part because with the terms of the separation from the EU yet to be agreed, “overseas customers do not know what tariffs will apply to steel they buy from the company.”

“Brexit has stripped British Steel’s overseas order book down to the bone,” a Labour Party member of parliament told The New European.