Ministers ask Hunt for £300m to avert mass British Steel job losses

Published

2 years ago

December 31, 2022

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Ministers are urging the chancellor to provide £300m of taxpayers’ money to avert the closure of British Steel’s two blast furnaces – a move that would trigger the loss of thousands of industrial jobs in northern England.

Sky News has learnt that Grant Shapps, the business secretary, and Michael Gove, the levelling-up secretary, wrote to Jeremy Hunt this month to warn that the demise of British Steel could cost the government up to £1bn in decommissioning and other liabilities.

In their letter, a copy of which has been seen by Sky News, Mr Hunt was asked to consider the economic case for supporting both British Steel, which is owned by a Chinese conglomerate, and the wider UK steel industry.

“Every other G20 nation has maintained domestic steel production and, while we do not think that this should come at any cost, we do believe it is in HMG’s interest to offer well-designed and targeted funding which unlocks private investment, achieves a good outcome for taxpayers, and enables transformed, decarbonised and viable domestic steel production to continue in the UK in the long-term,” Mr Shapps and Mr Gove wrote.

“We do not want to become reliant on steel sources elsewhere in the same way that energy security has become self-evidently important.

“Moreover, our steel requirement will increase by 20% due to large domestic infrastructure projects already committed to in the UK.”

One industry source briefed on the discussions in Whitehall said the chancellor had instructed Treasury officials to scrutinise the request.

The letter to Mr Hunt warned that British Steel “does not have a viable business without government support”.

“Closing one blast furnace would be a stepping-stone to closure of the second blast furnace, resulting in a highly unstable business model dependent on Chinese steel imports,” Mr Shapps and Mr Gove wrote.

“The local economic impact of closing both blast furnaces is estimated to be in the region of £360m to £640m, with a further £500m to £1bn liability for HMG through compulsory liquidation, insolvency and land liabilities (though £40m could potentially be raised through asset recovery”.

“Given the magnitude of the liabilities due to fall on HMG in the event of blast furnace closure, and following the PM’s steer, we would like officials to test whether net government support in the region of £300m for British Steel could prevent closure, protect jobs and create a cleaner viable long-term future for steel production in the United Kingdom.”

The fate of British Steel, which was bought by Jingye Group out of a previous insolvency process less than three years ago, has become increasingly unclear in recent months as the current owners have indicated that they would not maintain its operations without taxpayer funding.

British Steel employs about 4,000 people, with thousands more jobs in its supply chain dependent upon the company.

According to the letter to Mr Hunt, British Steel has already informed the government that it could close one of the Scunthorpe blast furnaces as soon as next month, with the loss of 1,700 jobs.

This would be “followed by the second blast furnace closing later in 2023, creating cumulative direct job losses of around 3,000”, Mr Shapps and Mr Gove wrote.

The plea to Mr Hunt followed a round of talks between Mr Shapps and Jingye earlier in December about supporting Britain’s second-largest steel producer.

Mr Shapps’ predecessor, Jacob Rees-Mogg – who lasted just weeks as business secretary under Liz Truss – opened formal talks with Jingye in October about the provision of government funding to help British Steel decarbonise.

One of the pre-conditions set by Whitehall for the discussions was that Jingye would not cut jobs at British Steel while the discussions were ongoing, although the recent letter to Mr Hunt said that ministers “cannot guarantee the company will choose to support jobs in the short term”.

Tata Steel, which is the biggest player in the UK steel sector, has also requested financial help from the government.

Responding to an enquiry from Sky News, a government spokesman said: “The government is committed to securing a sustainable and competitive future for the UK steel sector and we are working closely with industry to achieve this.

“We recognise that businesses are feeling the impact of high global energy prices, including steel producers, which is why we announced the Energy Bill Relief Scheme to bring down costs.

“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 £800m since 2013.”

The request for financial support from Jingye poses a political headache for ministers, given the scale of the potential job losses which might result from a refusal to provide taxpayer aid.

An agreement to provide substantial taxpayer funding to a Chinese-owned business, however, would inevitably 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.

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 Boris Johnson, the then prime minister, as assuring the future of steel production in Britain’s industrial heartlands.

British Steel has previously said of its negotiations with Whitehall: “We are continuing formal talks with the UK Government to help us overcome the global challenges we currently face.

“The government understands the significant impact the economic slowdown, rising inflation and exceptionally high energy and carbon prices are having on businesses like ours and we look forward to working together to build a sustainable future.”

Business

US-UK trade deal ‘done’, says Trump as he meets Starmer at G7

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2 hours ago

June 17, 2025

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US-UK trade deal 'done', says Trump as he meets Starmer at G7

The UK-US trade deal has been signed and is “done”, US President Donald Trump has said as he met Sir Keir Starmer at the G7 summit.

The US president told reporters: “We signed it, and it’s done. It’s a fair deal for both. It’ll produce a lot of jobs, a lot of income.”

As Mr Trump and his British counterpart exited a mountain lodge in the Canadian Rockies where the summit is being held, the US president held up a physical copy of the trade agreement to show reporters.

Several leaves of paper fell from the binding, and Mr Starmer quickly bent down to pick them up, saying: “A very important document.”

Sir Keir said the document “implements” the deal to cut tariffs on cars and aerospace, adding: “So this is a very good day for both of our countries – a real sign of strength.”

Mr Trump added that the UK was “very well protected” against any future tariffs, saying: “You know why? Because I like them”.

However, he did not say whether levies on British steel exports to the US would be set to 0%, saying “we’re gonna let you have that information in a little while”.

What exactly does trade deal being ‘done’ mean?

The government says the US “has committed” to removing tariffs (taxes on imported goods) on UK aerospace goods, such as engines and aircraft parts, which currently stand at 10%.

That is “expected to come into force by the end of the month”.

Tariffs on car imports will drop from 27.5% to 10%, the government says, which “saves car manufacturers hundreds of millions a year, and protects tens of thousands of jobs”.

The White House says there will be a quota of 100,000 cars eligible for import at that level each year.

But on steel, the story is a little more complicated.

The UK is the only country exempted from the global 50% tariff rate on steel – which means the UK rate remains at the original level of 25%.

That tariff was expected to be lifted entirely, but the government now says it will “continue to go further and make progress towards 0% tariffs on core steel products as agreed”.

The White House says the US will “promptly construct a quota at most-favoured-nation rates for steel and aluminium articles”.

Other key parts of the deal include import and export quotas for beef – and the government is keen to emphasise that “any US imports will need to meet UK food safety standards”.

There is no change to tariffs on pharmaceuticals for the moment, and the government says “work will continue to protect industry from any further tariffs imposed”.

The White House says they “committed to negotiate significantly preferential treatment outcomes”.

Mr Trump also praised Sir Keir as a “great” prime minister, adding: “We’ve been talking about this deal for six years, and he’s done what they haven’t been able to do.”

He added: “We’re very longtime partners and allies and friends and we’ve become friends in a short period of time.

“He’s slightly more liberal than me to put it mildly… but we get along.”

Sir Keir added that “we make it work”.

The US president appeared to mistakenly refer to a “trade agreement with the European Union” at one point as he stood alongside the British prime minister.

Mr Trump announced his “Liberation Day” tariffs on countries in April. At the time, he announced 10% “reciprocal” rates on all UK exports – as well as separately announced 25% levies on cars and steel.

In a joint televised phone call in May, Sir Keir and Mr Trump announced the UK and US had agreed on a trade deal – but added the details were being finalised.

Ahead of the G7 summit, the prime minister said he would meet Mr Trump for “one-on-one” talks, and added the agreement “really matters for the vital sectors that are safeguarded under our deal, and we’ve got to implement that”.

Business

Poundland to stop paying rent at hundreds of stores in rescue deal

Published

18 hours ago

June 16, 2025

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Poundland to stop paying rent at hundreds of stores in rescue deal

Poundland will halt rent payments at hundreds of its shops if a restructuring of the ailing discount retailer is approved by creditors later this summer.

Sky News has learnt that Poundland’s new owner, the investment firm Gordon Brothers, is proposing to halt all rent payments at so-called Category C shops across the country.

According to a letter sent to creditors in the last few days, roughly 250 shops have been classed as Category C sites, with rent payments “reduced to nil”.

Poundland will have the right to terminate leases with 30 days’ notice at roughly 70 of these loss-making stores – classed as C2 – after the restructuring plan is approved, and with 60 days’ notice at about 180 more C2 sites.

The plan also raises the prospect of landlords activating break clauses in their contracts at the earliest possible opportunity if they can secure alternative retail tenants.

In addition to the zero-rent proposal, hundreds of Poundland’s stores would see rent payments reduced by between 15% and 75% if the restructuring plan is approved.

The document leaves open the question of how many shops will ultimately close under its new owners.

A convening hearing has been scheduled for next month, while a sanction hearing, at which creditors will vote on the plan, is due to occur on or around August 26, according to one source.

The discounter was sold last week for a nominal sum to Gordon Brothers, the former owner of Laura Ashley, amid mounting losses suffered by its Warsaw-listed owner, Pepco Group.

Poundland declined to comment.

Business

Israel-Iran conflict poses new cost of living threat – here’s why

Published

23 hours ago

June 16, 2025

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Israel-Iran conflict poses new cost of living threat - here's why

The UK’s cost of living crisis hangover is facing fresh pressure from the Israel-Iran conflict and growing tensions across the Middle East.

Whenever the region, particularly a major oil-producing country, is embroiled in some kind of fracas, the potential consequences are first seen in global oil prices.

The Middle East accounts for a third of world output.

Money latest: ‘Unusual movement’ in house prices

Iran’s share of the total is only about 3%, but it is the second-largest supplier of natural gas.

Add to that its control of the key Strait of Hormuz shipping route, and you can understand why any military action involving Iran has huge implications for the global economy at a time when a US-inspired global trade war is already playing out.

What’s happened to oil prices?

Global oil prices jumped by up to 13% on Friday as the Israel-Iran conflict ramped up.

It was the biggest one-day leap seen since Russia invaded Ukraine in February 2022, which gave birth to the energy-driven cost-of-living crisis.

From lows of $64 (£47) a barrel for Brent crude, the international benchmark, earlier this month, the cost is currently 15% higher.

Iran ships all its oil to China because of Western sanctions, so the world’s second-largest economy would have the most to lose in the event of disruption.

Should that happen, China would need to replace that oil by buying elsewhere on the international market, threatening higher prices.

How are natural gas prices holding up?

UK day-ahead prices are 15% up over the past week alone.

Europe is more dependent on Middle East liquefied natural gas (LNG) these days because of sanctions against Russia.

The UK is particularly exposed due to the fact that we have low storage capacity and rely so much on gas-fired power to keep the lights on and for heating.

Israel-Iran latest: Tehran threatens to leave nuclear treaty

The day-ahead price, measured in pence per therm (I won’t go into that), is at 93p on Monday.

It sounds rather meaningless until you compare it with the price seen less than a week ago – 81p.

The higher sum was last seen over the winter – when demand is at its strongest.

What are the risks to these prices?

Market experts say Brent crude would easily exceed $100 (£74) a barrel in the event of any Iranian threats to supplies through the Strait of Hormuz – the 30-mile wide shipping lane controlled by both Iran and Oman.

While Iran has a history of disrupting trade, analysts believe it will not want to risk its oil and gas income through any blockade.

What do these price increases mean for the UK?

There are implications for the whole economy at a time when the chancellor can least afford it, as she bets big on public sector-led growth for the economy.

We can expect higher oil, gas and fuel costs to be passed on down supply chains – from the refinery and factory – to the end user, consumers. It could affect anything from foodstuffs to even fake tan.

Increases at the pumps are usually the first to appear – probably within the next 10 days. Prices are always quick to rise and slow to reflect easing wholesale costs.

Energy bills will also take in the gas spike, particularly if the wholesale price rises are sustained.

The energy price cap from September – and new fixed-term price deals – will first reflect these increases.

How does this all play out in the coming months?

So much depends on events ahead.

But energy price rises are an inflation risk and a potential threat to future interest rate cuts.

While LSEG data shows financial markets continuing to expect a further two interest rate cuts by the Bank of England this year, the rate-setting committee will be reluctant to cut if the pace of price growth is led higher than had been expected.

At a time when employers are grappling with higher taxes and minimum pay thresholds, and consumers a surge in bills following the ‘awful April’ hikes to council tax, water and other essentials, a fresh energy-linked inflation spike is the last thing anyone needs.