Choose your villain in the British Steel crisis. The government has dithered for years about the future of steelmaking in the UK and has stumbled from one crisis to another. Or blame the unresolved Brexit pantomime in Westminster. Or point to the company’s private equity owner, Greybull Capital, whose past calamities include Monarch Airlines and electricals chain Comet.
There’s truth in all versions. Let’s start with the government since ministers offered a bizarre spectacle on Monday when they unveiled their shiny new “steel charter”, a pledge to increase the amount of UK steel used in national infrastructure projects. The aim is worthy, many would agree, but the fanfare seemed to belong to a parallel universe. What use is a charter for the future if the immediate threat is to a large plant in Scunthorpe and 5,000 jobs?
Such late-in-the-day policymaking is standard, many in the steel industry would argue – and with good reason. The aerospace and automotive industries already have their “sector deals” with government, the product of the business department’s new enthusiasm for operating an industrial policy. But steel, a supplier to both those sectors, is still waiting for substance. A loosely binding procurement policy is a long way from being a coordinated strategy to transform an industry that plainly needs to adapt to a lower-carbon future.
The Brexit factor is undeniable. If the UK were to leave the European Union in November in chaotic fashion, tariffs could be imposed on UK steel exports under WTO rules. You can’t blame European customers, who accounted for more than half British Steel’s turnover last year, for retreating.
But then there’s Greybull. Its presence, one suspects, is the biggest single obstacle to the government agreeing a bailout. When Monarch failed under Greybull’s ownership in 2017, taxpayers were landed with a £60m bill for repatriating 100,000 passengers. The private equity firm, by contrast, emerged as top creditor in the administration. There are questions of trust and credibility.
Greybull always seemed an unlikely would-be saviour of the Scunthorpe steelworks, bought for a token £1 from Tata Steel in 2016, and ministers should be asking hard questions of its management. The firm is charging interest on loans to British Steel at 9.6%, a princely rate. What investment has it made in decarbonising operations? If the business model under Greybull relies on importing iron ore from Australia and coal from South Africa, the government should fear that a £30m loan today would merely defer the next emergency. Other UK producers are switching to recycled domestic steel and renewable energy. What’s Greybull doing?
A fortnight ago the government agreed a £120m loan to cover British Steel’s cost of buying carbon credits under an EU-scheme to limit emissions. At the time it seemed a respectable use of public money since the delay in the UK’s exit from the EU meant the allocation of credits to all UK companies had been temporarily suspended. But the FT later reported that Greybull had already sold surplus allocations in what appeared to be an a badly timed trade. Other UK steel producers, note, have not asked for loans to get over the permit obstacle. Again, there is an issue of trust with Greybull.
Business secretary Greg Clark faces a tough choice. Lending yet more money to a Greybull-owned British Steel could be a triumph of hope over experience. A full-blown administration risks closure of the Scunthorpe plant, making the government’s hazy industrial strategy even harder to discern. Nationalisation would be an extreme solution, but politically toxic for ministers.
The pragmatic move could be an administration of the holding company, to get Greybull out of the picture, while keeping the operating businesses alive with temporary public support. That, at least, would create time to hunt for long-term backers, albeit the queue could be short. Doing nothing, and risking irreversible collapse, should not be an option.
Metro Bank board dodges a bullet
Metro Bank founder and chairman Vernon Hill seemed more surprised than anyone: not a single shareholder asked a question at the bank’s annual meeting on Tuesday.
Nobody wanted to rage about the 80% fall in the share price in the past 14 months. Metro’s basic banking blunder, in which £900m of loans were placed in the wrong risk bracket, was left unexamined. Last week’s £375m fund-raising was taken on the chin.
True, there was a modest 12% vote against Hill’s re-election, and larger protests against the heads of Metro’s audit and remuneration committees. But the board won all its resolutions comfortably. It sometimes claimed that we’re living in a golden era for shareholder activism; don’t believe it.
