British Steel’s Chinese owner seeks huge government aid package

Published

2 years ago

October 1, 2022

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The owners of Britain’s second-biggest steel producer are seeking an urgent package of financial support from taxpayers amid renewed fears for thousands of industrial jobs in the north of England.

Sky News has learnt that Jingye Group, which bought British Steel out of insolvency in 2020, has told ministers that the company’s two blast furnaces are unlikely to be viable without government aid.

British Steel, which is headquartered in Scunthorpe, north Lincolnshire, employs about 4,000 people, with thousands more jobs in its supply chain dependent upon the company.

The request from Jingye poses a major headache for Jacob Rees-Mogg, the new business secretary, on the eve of the Conservative Party’s annual conference in Birmingham.

While the precise scale of the support being sought by the Chinese industrial group was unclear this weekend, insiders suggested that it would need “hundreds of millions of pounds” to keep the Scunthorpe blast furnaces operational.

It was also unclear whether any financial subsidy would be in the form of a loan or grant.

One insider said that Jingye was prepared to make thousands of people redundant if ministers rejected its request.

It would then plan to import steel from China to roll at British Steel’s UK sites, according to the insider.

This weekend, the government confirmed that it was “working at pace with the company to understand the best way forward as it seeks to secure a more sustainable future”.

“We recognise that businesses are feeling the impact of high global energy prices, particularly steel producers, which is why we have announced the Energy Bill Relief Scheme to bring down costs,” a spokesman for the Department for Business, Energy and Industrial Strategy said.

“This is in addition to extensive support we have provided to the steel sector as a whole to help with energy costs, worth more than £780m since 2013.”

Industrial consumers of energy have complained for months that soaring prices are imperilling their ability to continue investing, with continuing uncertainty about the duration and cost of a recently announced government subsidy scheme.

For Mr Rees-Mogg, who took over as business secretary less than a month ago, a decision over government support presents a politically undesirable menu of choices.

If no state funding is made available and significant numbers of jobs are axed, it would undermine a key tenet of the ‘levelling-up’ strategy that became a doctrine of Boris Johnson’s administration.

An agreement to provide substantial taxpayer funding to a Chinese-owned business, however, would almost certainly provoke outrage among Tory critics of Beijing.

China’s role in global steel production, after years of international trade rows about dumping, would make any subsidies even more contentious.

A British Steel spokesman said: “We are investing hundreds of millions of pounds in our long-term future but like most other companies we are facing a significant challenge because of the economic slowdown, surging inflation and exceptionally high energy and carbon prices.

“We welcome the recent announcement by the UK government to reduce energy costs for businesses and remain in dialogue with officials to ensure we compete on a level playing field with our global competitors.”

It is the second time in little more than three years that serious doubt has been cast over British Steel’s future.

In May 2019, the Official Receiver was appointed to take control of the company after negotiations over an emergency £30m government loan fell apart.

British Steel had been formed in 2016 when India’s Tata Steel sold the business for £1 to Greybull Capital, an investment firm.

As part of the deal that secured ownership of British Steel for Jingye, the Chinese group said it would invest £1.2bn in modernising the business during the following decade.

Jingye’s purchase of the company, which completed in the spring of 2020, was hailed by Mr Johnson as assuring the long-term future of steel production in Britain’s industrial heartlands.

“The sounds of these steelworks have long echoed throughout Yorkshire and Humber and the North East,” he said.

“Today, as British Steel takes its next steps under Jingye’s leadership, we can be sure these will ring out for decades to come.

“I’d like to thank every British Steel employee in Scunthorpe, Skinningrove and on Teesside for their dedication and resilience which has kept the business thriving over the past year.

“Jingye’s pledge to invest £1.2 billion into the business is a welcome boost that will not just secure thousands of jobs, but ensure British Steel continues to prosper.”

Tata, which owns the vast Port Talbot steelworks in Wales, remains Britain’s biggest steel producer.

It, too, has sought government support in recent months, with the Financial Times reporting in July that the Indian-owned group was seeking £1.5bn of taxpayer funding to help it decarbonise its operations.

Liberty Steel, the third-biggest player in the industry, saw a bid for £170m in state aid rejected last year by Kwasi Kwarteng, the then business secretary.

As chancellor, Mr Kwarteng will play a key role in determining the fate of Jingye’s request for support.

This weekend, it was unclear how quickly a decision would be reached by ministers or whether advisers had been drafted in to help negotiate on either side.

A government insider pointed out that a range of support schemes aimed at heavy industry remained operational.

Business

P&O spent £47m sacking and replacing 786 mainly British seafarers in 2022

Published

3 hours ago

November 13, 2024

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P&O spent £47m sacking and replacing 786 mainly British seafarers in 2022

P&O Ferries spent more than £47m summarily sacking hundreds of seafarers in 2022, helping it cut losses by more than £125m and putting it on a path to profitability, according to accounts due to be published in the coming days.

The dismissal of 786 mainly British seafarers, and their replacement with largely non-European agency staff earning as little as £4.87 an hour, was hugely controversial, drawing criticism from across the political spectrum and threats of a consumer boycott.

The controversy was rekindled last month when Sky News revealed that DP World, P&O‘s Dubai-based parent, considered withdrawing a £1bn investment at its London Gateway port following criticism of P&O by the Transport Secretary Louise Haigh.

P&O has always maintained the restructuring was necessary to allow it to compete with its rivals on cross-Channel routes, and prevent a total collapse of the company with the loss of more than 2,000 jobs.

In financial statements for P&O Holdings, filed 11 months late and seen by Sky News, the company says the restructuring cost £47.4m including legal fees and consultants, allowing it to cut the overall wage and salary bill by £21.3m.

In a note accompanying the accounts submitted to Companies House, P&O’s directors describe the restructuring as part of a “transformational journey” that will help it return to recording a profit before tax this year.

“The business has been on a transformational journey as it has recovered from the challenges of the global pandemic, Brexit and the impact of disruption caused by the change in the crewing model,” the directors say.

“The group believes that the transformational actions that commenced in 2022 and continue through into 2024 will equip the business to grow profitably when demand rises in the coming years.”

Brexit and COVID financial distress

The accounts reveal the financial distress in which P&O found itself in 2022.

Having recorded losses of £375m the previous year as it struggled to recover from the pandemic-era decline in passenger numbers and post-Brexit complications, it was in breach of its covenants to external lenders underwriting the construction of new hybrid cross-Channel ferries.

Despite the restructuring costs, revenue increased by £83.3m to £918m in the financial year, but the company still recorded a loss of £249m and was reliant on loans totalling £365m from parent company DP World to remain a going concern.

An additional £70m was made available this year, with 4.5% interest rolled up and not requiring any repayment until 2028 at the earliest.

The financial statements also reveal that P&O was forced to sell one of the new cross-Channel ferries to a French subsidiary to pay off an external financing loan of £76.9m, and then lease the vessel back from its ultimate owner.

In a statement, P&O Ferries said: “Our 2022 financial accounts show the challenges faced by the business at that time, and why the business needed to transform into a competitive operator with a sustainable long-term future.

“P&O Ferries has taken steps to adjust to new market conditions, matching our capacity to demand, and adopting a more flexible operating model that enables us to better serve our customers.”

Business

Why P&O Ferries’ pariah status may never change

Published

3 hours ago

November 13, 2024

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Why P&O Ferries' pariah status may never change

P&O Ferries’ summary sacking of hundreds of seafarers in March 2022 was and remains perhaps the most ruthless act of “restructuring” in British corporate history.

From the furthest left of the trades union movement to the right of the Conservative government, P&O and its lightning-rod chief executive Peter Hebblethwaite were condemned for shamelessly putting profit before people, without the courtesy of notice and due consultation.

Two years on, the company remains unapologetic and a pariah to some, including the transport secretary. That may never change. But long-overdue accounts for 2022 do illuminate why the company acted as it did.

In 2022, buffeted by Brexit and with passenger numbers devastated by COVID, P&O was holed below the water line, leaking cash and sinking fast.

Losses in 2021 had swelled to £375m, with payroll costs for 3,018 employees – 859 of them seafarers – of more than £132m.

It was also in breach of its covenants on more than £70m of loans from an external lender underwriting the cost of new hybrid cross-Channel ferries.

Only rolling and increasing loans from parent company DP World were preventing P&O from going under.

As well as earning at least the UK minimum wage, those seafarers were bound by work patterns negotiated with unions, including the RMT, that P&O says lacked flexibility and left some crossings unprofitable.

By contrast one of their competitors on the Dover-Calais route, Irish Ferries, was exploiting international maritime law to pay agency seafarers far less.

Mr Hebblethwaite’s response – and DP World insists it was his call – was breathtaking. The unionised workforce was fired by video call, escorted from vessels and, after a four-week shutdown, replaced by workers largely flown in from beyond Europe for rosters involving months at sea.

That move saved more than £21m from the payroll and helped a turnaround the company says will see a return to pre-tax profit this year.

Ask P&O executives in Dover or those from its parent company in Dubai, and they will tell you the ends justified the means, and point out that passenger numbers are increasing.

New laws that came too late for sacked workers

And these accounts have been filed just as legislation takes effect that would have removed any advantage from the sackings.

Since May, French law has required the minimum wage to be paid in French waters, and from December, UK law will require the same, making the Channel a haven of relatively high pay in a maritime industry overwhelmingly fuelled by cheap labour sourced from Asia.

It is an irony unlikely to be lost on seafarers who paid with their jobs.

Business

Full list of Post Office crown branches that could close under transformation plan

Published

5 hours ago

November 13, 2024

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Full list of Post Office crown branches that could close under transformation plan

The Post Office has announced that more than a hundred larger crown branches – those owned by the company directly – could close with the possible loss of hundreds of jobs.

The Communication Workers Union has signalled a fight ahead as the Post Office confirmed details of its transformation plan.

The affected branches collectively employ close to 1,000 people and are said to be significantly loss-making.

The full list of at-threat branches is as follows:

Bangor – 143 Main Street, BT20 4AQ
Belfast City – 12-16 Bridge Street, BT1 1LT
Edinburgh City – Waverley Mall, Waverley Bridge, EH1 1BQ
Glasgow – 136 West Nile Street, G1 2RD
Haddington – 50 Court Street, EH41 3UU
Inverness – 14-16 Queensgate, IV1 1AX
Kirkwall – 15 Junction Road, KW15 1DD
Londonderry – 3 Custom House Street, BT48 6AA
Newtownards – 8 Frances Street, BT23 4FA
Saltcoats – Chapelwell Street, KA21 5EX
Springburn Way – 230 Springburn Way, Glasgow, G21 1BU
Stornoway – 16 Francis Street, HS1 2AD
Wester Hailes – 14A Westside Plaza, EH14 2SW
Barnes Green – Lee Road, Manchester, M9 4DL
Bransholme – 51A Goodhart Road, Bransholme, Hull, HU7 4JF
Bridlington – 15-17 Quay Road, YO15 2AA
Chester Le Street – 137 Front Street, Chester-le-Street, DH3 3AA
Crossgates – 9 Austhorpe Road, Crossgates, Leeds, LS15 8QS
Eccles – 63 Church Street, Manchester, M30 0NS
Furness House – 5-7 Dalton Road, LA14 1LE
Grimsby – 67-71 Victoria Street, DN31 1AA
Hyde – 30-32 Market Place, SK14 2QU
Kendal – 75 Stricklandgate, LA9 4AA
Manchester – 26 Spring Gardens, M2 1BB
Morecambe – 2-6 Victoria Street, LA4 4AA
Morley – 129A Queens Street, Leeds, LS27 8TB
Poulton Le Fylde – Teanlowe Centre, FY6 7BB
Prestwich – 2 Kingswood Road, Manchester, M25 3NS
Rotherham – 3-5 Bridgegate, S60 1PJ
Salford City – 112 Rossall Way, M6 5DS
Sheffield City – (unclear which branch)
South Shields – 8 King Street, NE33 1HT
St Johns – (unclear)
Sunderland City – 45-47 Fawcett Street, SR1 1RR
The Markets – 6-16 New York Street, Leeds, LS2 7DZ
Birmingham – 1 Pinfold Street, B2 4AA
Breck Road – 11 The Mall, Liverpool, L5 6SW
Caernarfon – Castle Square, LL55 2ND
Didsbury Village – Albert Hill Street, Manchester, M20 6RJ
Harlesden – 2 Wendover Road, London, NW10 4RU
Kettering – 17 Lower Street, NN16 8AA
Kingsbury – 439-441 Kingsbury Road, London, NW9 9DU
Leigh – 17 Silk Street, WN7 1AA
Leighton Buzzard – 7-9 Church Square, LU7 1AA
Matlock – 14 Bank Road, DE4 3AA
Milton Keynes – Unit N1 802 Midsummer Boulevard, MK9 3QA
Northolt – 46 Mandeville Road, UB5 5AA
Old Swan – 489 Prescot Road, Liverpool, L13 3BU
Oswestry – 17 Willow Street, SY11 1AG
Oxford – 102-104 St Aldates, OX1 1ZZ
Redditch – Threadneedle House, Alcester Street, B98 8AB
Southall – 38 The Broadway, UB1 1PY
St Peters Street – 14 St Peters Street, St Albans, AL1 3AA
Stamford – All Saints Place, Stamford, PE9 2EY
Stockport – 36-40 Great Underbank, SK1 1QF
Wealdstone – 4-12 Headstone Drive, Harrow, HA3 5QL
Barnet – 63-65 High Street, EN5 5UU
Cambridge City – 57-58 St Andrew Street, CB2 3BZ
Canning Town – 22 Barking Road, London, E16 1HF
Cricklewood – 193 Cricklewood Broadway, London, NW2 3HR
Dereham – Quebec Street, Dereham, NR19 2AA
Golders Green – 879 Finchley Road, London, NW11 8RT
Hampstead – 79-81A Hampstead High Street, London, NW3 1QL
Harold Hill – 17 Farnham Road, Romford, RM3 8EJ
Kilburn – 79A Kilburn High Road, London, NW6 6JG
Kingsland – 118-120 Kingsland High Street, London, E8 2NX
Lower Edmonton – 1-7 South Mall, Edmonton Green, London, N9 0TX
Roman Road – 138 Roman Road, Bethnal Green, London, E2 0RX
South Ockendon – 8 Derwent Parade, RM15 5EB
Stamford Hill – (unclear, two possible locations)
Bideford – The Quay, EX39 2EX
Dunraven Place – 4-5 Wyndham Street, Bridgend, CF31 1AB
Gloucester – Kings Square, GL1 1AD
Liskeard – The Parade, PL14 6AA
Merthyr Tydfil – 3 John Street, CF47 0AB
Mutley – 38 Mutley Plain, Plymouth, PL4 6LL
Nailsea – Crown Glass Place, Bristol, BS48 1RA
Newquay – 31-33 East Street, TR7 1BU
Paignton – 34 Torquay Road, TQ3 3EX
Port Talbot – 139 Station Road, SA13 1NG
Stroud – 16-17 Russell Street, GL5 3AA
Teignmouth – Den Road, TQ14 8AA
Yate Sodbury – 1 South Parade, Bristol, BS37 4BB
Baker Street – 111 Baker Street, London, W1U 6SG
Bexhill On Sea – Devonshire Square, TN40 1AA
Cosham – 13 High Street, Portsmouth, PO6 3EH
Great Portland Street – 173 Great Portland Street, London, W1W 5PH
High Street (10) – (unclear, multiple locations)
Kensington – 208-212 Kensington High Street, London, W8 7RG
Knightsbridge – 6 Raphael Street, London, SW7 1DL
Melville Road – 20 Melville Road, Hove, BN3 1UB
Paddington Quay – 4 Praed Street, London, W2 1JX
Portsmouth – Slindon Street, PO1 1AB
Raynes Park – 1a Amity Grove, London, SW20 0LL
Romsey – 15-25 Church Street, SO51 8WA
Westbourne – 10-12 Seamoor Road, Bournemouth, BH4 9AW
Windsor – 38-39 Peascod Street, SL4 1AA
Worlds End – 351-353 Kings Road, London, SW3 5EX
Aldwych – 95 Aldwych, London, WC2B 4JN
Brixton – 242 Ferndale Road, London, SW9 8FR
Broadway – 1 Broadway, London, SW1H 0AX
City of London – 12 Eastcheap, London, EC3M 1AJ
East Dulwich – 74-76 Lordship Lane, London, SE22 8HH
Eccleston Street – 6 Eccleston St, London SW1W 9LS
High Holborn – 181 High Holborn, London, WC1V 7RL
Houndsditch – 11 White Kennet Street, London, E1 7BS
Islington – 160-161 Upper Street, London, N1 1US
Kennington Park – 410 Kennington Road, London, SE11 4QA
London Bridge – 19A Borough High Street, London, SE1 9SF
Lupus Street – 121-125 Lupus Street, London, SW1V 3EW
Mount Pleasant – Rosebery Avenue, London, EC1R 4SQ
Vauxhall Bridge Road – 167 Vauxhall Bridge Road, London, SW1V 2ST