UK Government Drawing Up Contingency Plans to Save Liberty Steel
Bloomberg, citing people familiar with the matter, reported that UK’s Business Secretary Mr Kwasi Kwarteng and other senior officials have been holding intensive discussions with GFG Alliance to draw contingency plans in case the government needs to step in to save Liberty Steel from collapse. Sources told Bloomberg “Several potential contingency plans are under consideration, including one that would involve the government running the company with state funds while a potential buyer is sought but no decisions have been made, as the company remains solvent and hasn’t asked for any specific help.”
Financial Times separately reported that “British government is considering stepping in and using public funds to maintain production akin to support granted to British Steel in 2019. In May 2019, British Steel was forced into compulsory liquidation and was passed to the Official Receiver, an employee of the government agency, the Insolvency Service. It was then sold to Chinese steel group Jingye last March but the intervention cost taxpayers nearly GBP 600 million.
Bloomberg also quoted a government spokesperson as saying that “The government is closely monitoring developments around Liberty Steel and continues to engage closely with the company, the broader UK steel industry and trade unions. Recognising that the pandemic has had a significant impact across the whole UK economy, including steel producers, our unprecedented package of support is available to the sector to protect jobs and ensure that producers have the right support during this challenging time.”
The future of Liberty Steel has been put in doubt by the unravelling of Greensill Capital, which is the biggest lender to Gupta’s GFG Alliance, of which Liberty is a part. GFG employs about 5,500 people at more than 30 sites in the UK. A court filing revealed Greensil had around USD 5 billion of exposure to Mr Gupta’s company. There are worries that Greensill could have a charge on the Liberty assets and therefore taxpayer money.