British Steel plunged into insolvency 225 days ago.
Since then, taxpayers have funded its operational losses of an estimated £1m a day. It doesn’t take a mathematician to see that this can only go on for so long; a deal securing the future of the company’s 4,500 staff needs to be agreed – and fast.
Chinese steelmaker Jingye has been in pole position since November’s announcement that a deal had been agreed in principle.
Jingye declared itself willing to pay £50m and invest up to £1.2bn, indicating a bright future for British Steel’s Scunthorpe site, which employs more than 3,000 highly skilled people and supports up to 20,000 more jobs in the area.
A month later, the North Lincolnshire constituency voted for the government that had signed the deal, electing a Conservative MP for the first time since 1987.
So far so good for Scunthorpe, as well as British Steel’s satellite manufacturing operations in Skinningrove and on Teesside, both also in Tory constituencies. Shortly after the election, the business minister, Andrea Leadsom, met senior officials from Jingye, including its chairman Li Ganpo.
What the former City debt trader and the former Communist party official said to one another is yet to be revealed but there is plenty of ground to be covered before they can shake hands and smile for the cameras.
Earlier in the British Steel rescue saga, officials let it be known that any buyer would have access to up to £300m in grants, loans and indemnities to sweeten the deal and spur investment.
That is less clear now. Whitehall officials indicate that while Jingye can seek access to government money, there would be no special favours, such as a bespoke package attached to the deal.
Instead, any government investment could only come via formal application for pots of money available to anyone, such as the regional growth fund.
One reason for this is that Europe’s steel industry body Eurofer has asked the European commission to keep a watchful eye on the transaction to ensure it does not breach state aid rules.
European steelmakers are particularly sensitive to this because they have been fighting a losing battle for survival in the face of mass dumping of cheap steel on the market by Chinese rivals in receipt of state subsidies.
Anything that looks too much like a taxpayer-funded sweetener for Jingye is likely to be met with opposition from across the Channel.
There have also been warnings from the US, where Chinese steel “rescues” have allegedly resulted in pay cuts, deteriorating conditions and disruption of trade unions.
Steelworkers’ union Community has given a cautious welcome to the prospective owners but wants to know more. “What we have heard from Jingye to date is very encouraging but we await the detail of their business plan,” said a spokesperson.
“It is of course vital for the workforce and communities to retain high-quality jobs going forward and it will be important for the success of the business to ensure terms and conditions remain attractive to the skilled steelworkers who have done all they can to get the business through this challenging period.”
There are other potential pitfalls too amid concerns that the longer time ticks on with a sale, the more of British Steel’s regular customers will go elsewhere for their steel, rendering the company a less attractive option.
Reports at the weekend suggested the company’s suppliers are also playing hardball, demanding shorter payment terms and better prices. Some observers have raised the usual national security concerns about a strategic asset being sold to a company from China.
The government insisted that Jingye has been vetted and there are “no national security concerns surrounding this acquisition”.
“The sales process is ongoing and we will continue to work with the official receiver [the government employee managing the deal] as he seeks to finalise a sale.”
Such optimism will give some cheer to steelworkers in Scunthorpe and beyond but we have been here before. Talks with Turkish pension fund, Oyak a deal that raised its own concerns, broke down earlier this year.
Liberty House, the steel group owned by UK-based Sanjeev Gupta, retains an interest and waits quietly in the wings – but for how long?
If a deal collapses for a second time, it will be back to the drawing board with the clock ticking even louder.
