LONDON, May 31, 2019 /PRNewswire/ -- The UK steel industry has taken a blow this week, as the high court has placed British Steel into compulsory liquidation.
Around 5,000 company employees have been left with an uncertain future, and the prospects for the European steel long product markets are similarly unclear. In this Insight we will present the factors that led to this development, as well as the implications of possible outcomes.
Forced into compulsory liquidation
The UK steel industry has taken a blow this week, as the high court has placed British Steel into compulsory liquidation following a failed attempt to receive a bailout from the UK government. Around 5,000 company employees have been left with an uncertain future, and the prospects for the European steel long product markets are similarly unclear. In this Insight we will present the factors that led to this development, as well as the implications of possible outcomes.
British Steel suffers under market conditions
The long products arm of Tata Steel Europe was initially acquired by Greybull Capital in 2016 for a token £1. After an initial period of profitability the firm has plunged into lossmaking territory. Several factors have contributed to this:
Carbon costs
One factor resulting from the failure to agree on a Brexit deal has been that the EU has not allocated free CO2 emission permits to UK companies in 2019. These would become forthcoming if a deal were agreed. British Steel earlier sold its excess credits, with the intention of buying them back when necessary and at lower prices.
The company was thus left without enough credits to cover its emissions and without the capital required to purchase more, especially considering the large rise in carbon credit prices this year. The UK government recently provided a loan of £120m to cover these purchases – sending the company further into debt.
Read the full story: https://www.crugroup.com/knowledge-and-insights/insights/2019/the-twilight-of-british-steel/
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