UK says British Steel’s Chinese owners demanding millions
Business Secretary Jonathan Reynolds is set for a showdown with the Chinese owners of British Steel after the government claimed they demanded hundreds of millions in taxpayer money for the steelworks at Scunthorpe. A search for a new buyer has stalled after Jingye asked for the cash to complete the transfer of the company. The…
Business Secretary Jonathan Reynolds is set for a showdown with the Chinese owners of British Steel after the government claimed they demanded hundreds of millions in taxpayer money for the steelworks at Scunthorpe.
A search for a new buyer has stalled after Jingye asked for the cash to complete the transfer of the company.
The government took control of British Steel in April, amid concerns that Jingye would close down the UK’s only remaining blast furnaces and put thousands of jobs at risk.
Jingye remain the official owners of British Steel after the government stopped short of fully nationalising the loss-making company, which ministers believe is worth effectively zero.
Negotiations have been taking place between officials, but BBC News understands Reynolds is likely to join the talks in September.
A senior source in the Department for Business and Trade would not rule out handing over some public money to the Chinese firm, but said the two sides’ valuations of British Steel were still very different.
The source stressed that while “there’s a public interest in protecting taxpayers’ money, there’s also a public interest in drawing this thing to a close”.
A spokesperson for the business department said they “acted quickly to ensure the continued operation of the blast furnaces and are working with Jingye to determine the best long-term sustainable future for the site”.
In April, MPs and peers were called back from their Easter holidays to pass legislation that allowed the government to take control of British Steel, during an extremely rare Saturday sitting of Parliament.
Reynolds said at the time that full nationalisation was the likely next step, but ministers had been hoping that Jingye would hand over ownership of the company for a nominal fee.
That was thrown into doubt during negotiations between the two sides earlier this summer, when Jingye told government officials they believed British Steel’s valuation was still in the hundreds of millions.
A government source would not reveal the exact figure, but said Jingye’s current valuation of British Steel ran into the hundreds of millions.
The two parties also clashed earlier this year over the amount of cash ministers were willing to offer as part of a potential rescue package.
Jingye rejected a £500m offer from the government in March, with sources suggesting they were holding out for something closer to £1bn.
Jingye claimed the Scunthorpe plant was losing £700,000 a day when it announced plans to close the site in March.
The government had already put aside a £2.5bn steel fund and has been using cash from that pot to cover the day-today running costs of the site since April.
But ministers do not see public ownership as a long-term solution and have repeatedly said they are confident they will find another commercial partner to take on the ownership of British Steel.
The search for that partner has stalled since Jingye’s demand for a large payout, and a senior government source said they “can’t bring in new ownership while this issue remains unresolved”.
They said the government was “closer to the beginning than the end” of talks with Jingye, but said they were confident of getting the Chinese firm to accept “a more realistic valuation”.
Another source close to the negotiations cast doubt on Jingye’s willingness to budge and said they believed the government would “need to step in and take ownership of the business” through another Parliamentary process.
Using Parliament to force through a full nationalisation is understood to be a “last resort” in ministers’ minds, because of concerns about the sort of message it could send to the wider business community.
Jingye has been contacted for comment.
