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British Steel’s Chinese owner seeks huge government aid package | Business News



The owners of Britain’s second-largest steelmaker are seeking an urgent financial aid package from taxpayers amid renewed concern over thousands of industrial jobs in northern England.

Sky News has learned that Jingye Group, which bought British Steel due to default in 2020, has told ministers that the company’s two blast furnaces could hardly survive without government support.

British Steel, with its headquarters in Scunthorpe, north Lincolnshire, employs around 4,000 people, with thousands of other jobs in the supply chain depending on the company.

The request from Jingye poses a headache for Jacob Rees-Mogg, the new business secretary, ahead of the Conservative Party’s annual conference in Birmingham.

While the exact size of the support the Chinese industrial group is seeking this weekend is unclear, insiders say it will need “hundreds of millions of pounds” to keep the company afloat. Scunthorpe blast furnaces.

It is also unclear if any financial aid is available in the form of loans.

An insider said that Jingye was prepared to leave thousands of people redundant if ministers refused their demands.

It then plans to import steel from China to roll at British Steel’s UK sites, according to insiders.

This weekend, the government confirmed that it is “working at a rapid pace with the company to understand the best path forward as it seeks to secure a more sustainable future”.

A spokesperson for the Department for Business, Energy and Industrial Strategy said: “We recognize that businesses are feeling the impact of high global energy prices, particularly steel producers.

“This is in addition to the broad support we have provided to the entire steel industry to help tackle energy costs, worth more than £780 million since 2013.”

Industrial energy consumers have complained for months that rising prices are hampering their ability to continue investing, with uncertainty over the timing and cost of a government subsidy plan. recently announced government.

For Mr Rees-Mogg, who took over as business secretary less than a month ago, a decision about government support presents a politically undesirable menu of choices.

Without state funding and significant job disruptions, that would undermine the main tenet of the ‘promotion’ strategy that has become the doctrine of the Boris Johnson administration.

However, a deal to provide substantial taxpayer funding for a Chinese-owned business would almost certainly spark outrage among Tory’s Beijing critics.

China’s role in global steel production, after years of contested international trade over dumping, would make any subsidies even more controversial.

A British Steel spokesman said: “We are investing hundreds of millions of pounds into our long-term future but like most companies we are facing significant challenges due to economic downturn, rising inflation and particularly high carbon and energy prices.

“We welcome the UK government’s recent statement to reduce energy costs for businesses and continue to dialogue with officials to ensure we compete on a level playing field with global rivals. bridge.”

This is the second time in more than three years that British Steel’s future has been seriously questioned.

In May 2019, the Receiver was formally appointed to take control of the company after negotiations over a £30 million government emergency loan broke down.

British Steel was formed in 2016 when Tata Steel of India sold the business for £1 to Greybull Capital, an investment firm.

As part of a deal to secure ownership of British Steel to Jingye, the Chinese group said it will invest £1.2 billion in modernizing its business over the next decade.

Jingye’s acquisition of the company, completed in spring 2020, was hailed by Mr Johnson as a guarantee of the long-term future of steel production in Britain’s industrial heartlands.

“The sound of these steel mills has long since reverberated across Yorkshire and the Humber and the North East,” he said.

“Today, as British Steel takes the next steps under Jingye’s leadership, we can be sure that these steps will resonate for decades to come.

“I would like to thank every British Steel employee in Scunthorpe, Skinningrove and at Teesside for their dedication and resilience that has helped the business thrive over the past year.

“Jingye’s commitment to invest £1.2 billion in the business is a welcome incentive not only to secure thousands of jobs but also to ensure British Steel continues to prosper.”

Tata, which owns the vast Port Talbot steel mill in Wales, remains Britain’s largest steel producer.

It has also sought government support in recent months, with the Financial Times reporting in July that the Indian-owned group was seeking £1.5 billion in taxpayer funding to help them eliminate their activity.

Liberty Steel, the third largest in the industry, saw a £170m state aid rejected last year by Kwasi Kwarteng, the business secretary at the time.

As prime minister, Mr. Kwarteng will play a key role in deciding the fate of Jingye’s request for support.

It remains unclear how quickly ministers will make a decision this weekend or whether advisers have been drafted to help with bilateral negotiations.

A government insider points out that a series of support programs aimed at heavy industry are still active.

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