Saving Steel: Cash Injection to Save Hundreds of Jobs at UK Steel Plants

October 18, 2021

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2 min read

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What's going on here?

GFG Alliance has promised to inject ÂŁ50m into its UK steel plants, saving 650 jobs.

What does this mean?

Global metals and energy company GFG Alliance has announced plans to pump £50m into its UK steel company Liberty Steel. This will allow operations to restart in Liberty Steel’s Rotherham and Stocksbridge plants in South Yorkshire. It will secure 650 workers’ jobs at the plants where production ceased in March 2021 due to financial difficulties. Workers were furloughed until 30 September 2021; since then they have been on 80% pay from Liberty Steel.

GFG raised the £50m needed to restart its UK steel plants through the financial restructuring of its Australian steelworks. It has been facing financial struggles since its main lender, Greensill Capital, went into administration in March 2021. GFG currently has over $5bn in outstanding debt, with $950m of that relating to its UK operations. As such, the recommencement of operations at Rotherham and Stocksbridge provides GFG with the opportunity to generate urgently needed cash. It also indicates a positive step for the UK’s steel industry more generally.

What's the big picture effect?

Whilst this does signify a step in the right direction, there are still some significant underlying problems with the steel industry in the UK. One of the industry’s most pressing concerns is the rising cost of energy. BBC News reported that gas prices have risen by 250% since January, with UK steel makers paying 50-80% more for electricity than German steel makers. This increase in energy prices has had a knock-on effect on the profitability of power-hungry industries such as steel. 

There is hope, however, that the rising price of steel will counterbalance the rising cost of energy. This would mean that, despite the fact that the steel plants are more expensive to run due to higher energy costs, they would also be selling their products at a higher price. Some industry members, however,  have raised concerns about the sustainability of production at Rotherham and of wider UK steel production. The general secretary of Community – a steelworkers’ union – and the boss of industry body UK Steel have both called upon the government to intervene in order to prevent energy prices from rising any further. The issue has caused contention between government bodies. Business Secretary Kwasi Kwarteng has expressed that he wishes to offer financial assistance to industries such as steel in the form of short-term loans and guarantees. The Treasury, however, is reluctant to issue such payouts, stating that it “has the interests of the taxpayer to look after”. The Treasury’s decision on whether or not to intervene will therefore have a significant effect on the UK’s steel industry, and consequently on the UK’s wider economy.

Report written by Catrin Trefor

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