Jingye Group agrees £70 million deal in principle to rescue British Steel
Chinese firm Jingye Group has agreed a deal in principle to purchase British Steel for £70 million.
The government will be on hand to assist with loan guarantees and additional support to help the deal over the line, having kept the stricken business running since May through the Official Receiver after it was put into compulsory liquidation.
The deal could protect 4,000 jobs at British Steel’s sites in Scunthorpe and neighbouring Teeside, alongside an additional 20,000 jobs in the supply chain and 1,000 more overseas.
Jingye employs 23,500 people and has major stakes in steel and iron making, as well as in the tourism, hospitality and property industries.
Director general of the UK Steel lobby group, Gareth Stace, told BBC Radio Four that the Jingye deal was “welcome”, and will preserve a “significant asset” to the UK.
Stace said: “Jingye are looking to make significant investment, are in for the longer term and therefore it isn't about keeping this site going for a year or two or a couple of years. To me, what I understand about the company, it's about looking to the future, so we're not going to be back in here in three years, five years, in 10 years' time.”
Stace added that British Steel’s output, which is roughly a third of the UK’s steel production, not only complements Jingye, but may also open the door for the UK steel industry to compete globally.
Stace said: “The problem we have is we have an uncompetitive business landscape in the UK. Government can change that.
"I'm talking about energy costs, business rates, procurement, the government buying more steel from the UK, free and fair trade, and even much more support for research and development, which we are going to lose when we fall out of the EU.
"What government needs to do is give us that business landscape. We can thrive on the global market and generate highly paid, highly skilled jobs for the UK economy.”
The deal will be particularly helpful for Jingye in the short term after the EU hit Chinese steel with 73.7 per cent tariffs in 2016. This came after swathes of cheap steel imports entered the European market from Asia and forced European operators to slash prices, which has had a knock-on effect on the UK steel industry.
Now, Jingye Group is looking to increase production at the Scunthorpe site from 2.5 million tonnes of steel per annum to over three million, but did warn that cost-cutting measures may have to be implemented.
However, Jingye’s chairman, Li Ganpo, recently visited the factory and assured local MP Nic Dakin and Andrew Percy, MP for nearby Brigg and Goole, that the company’s future would be in safe hands.
Reaction from the trade unions has been cautious but largely positive, with national officer for GMB union, Ross Murdoch, saying that he was “impressed with the passion and enthusiasm from the Jingye team.”
Murdoch said: “On the face of it, we cautiously welcome this sale, which finally provides some light at the end of the tunnel for 4,000 British Steel workers.
“However, due diligence on this sale was completed very quickly and the devil will be in the detail.”
A formal announcement on the deal is expected later on Monday.