Britain’s third-largest steelmaker was on Thursday put under government control after a judge branded its owners ‘hopelessly insolvent’.
A High Court judge has issued a winding-up order against Speciality Steel UK, which is part of the Liberty Steel group owned by Sanjeev Gupta, a metals tycoon originally from India. This decision was made due to the company’s long-standing unpaid debts.
The Official Receiver has taken control of the company’s facilities located in Rotherham and Stocksbridge, South Yorkshire, as well as Wednesbury, West Midlands. Discussions between officials and trade unions are ongoing to determine the future of the 1,450 employees affected.
The judge, Mr Justice Mellor, said: ‘It is quite clear that there are special managers lined up who have the support of the government.
‘I consider by far the preferable approach is to make a winding-up order.’
In court, it was revealed that officials from the Department for Business and Trade have been approached by independent parties interested in reviving steel production at some or all of these sites.
The Rotherham steelworks has two electric arc furnaces that have been inactive since last July. In contrast, Stocksbridge operates a smaller, specialized furnace that continues to function.
Workers, who make components for aerospace and defence companies, have continued to be paid by SSUK but now the government will cover their wages.
Metals tycoon Sanjeev Gupta, the founder of Liberty Steels Group, is at the center of this situation as Speciality Steel UK has been placed under control of the Official Receiver.
There were calls for the government to reverse its ‘net zero dogma’ in the wake of Liberty Steel’s collapse.
Andrew Griffith, the Tory Shadow Business Secretary, commented that the downfall of Liberty Steel is a result of what he termed as Labour’s excessively high energy costs, influenced by a commitment to net zero emissions.
‘British businesses cannot go on like this any longer.
‘As well as lower taxes, we need the government to exploit the cheap energy resources the UK already has.’
It is the second intervention by the government in the steel industry this year after ministers took control of British Steel – which runs the country’s last blast furnaces at Scunthorpe, North Lincolnshire – from former owner Jingye in April.
There were fears the Chinese company would turn off the furnaces after rejecting proposed government subsidies to continue operating and build a new electric arc furnace.
Cambridge-educated Gupta’s financial woes date from 2021, when lender Greensill Capital collapsed. Its administrators have since been trying to recover £3.3bn lent to Gupta Family Group (GFG) Alliance.
GFG Alliance has been under investigation by the Serious Fraud Office since 2021 over claims of suspected ‘fraudulent trading and money laundering’.
Lawyers for Gupta made a plea for more time to attempt a ‘pre-pack’ administration, being put together by investment manager Begbies Traynor, allowing him to buy the business out of insolvency while reducing its debts.
But Mr Justice Mellor found SSUK was ‘hopelessly insolvent’ with just £600,000 in the bank and a monthly wage bill of £3.7m.
Gupta’s parent company has 15 entities in insolvency proceedings across nine jurisdictions, the court heard.
Chris Williamson, Community steel union representative, is ‘hopeful’ for the firm’s survival
Rotherham steelworks, where the electric arc furnace has not produced steel since last year
Chris Williamson, Community steel union representative at Rotherham, called for the government to consider renationalising the business and managing it alongside Scunthorpe.
He said: ‘It would make sense. They (Scunthorpe) only have a certain lifespan in the blast furnaces but we’re ready to go with an electric arc furnace.’
Mr Williamson added he was ‘hopeful’ for the survival of the business.
Jeffrey Kabel, Liberty Steel’s Chief Transformation Officer, called the court ruling ‘irrational… when we have support to resume operations and facilitate creditor recovery’.
He added GFG had ‘pursued all options to make SSUK viable’ and invested nearly £200m in the steel firm.
Mr Kabel pledged to ‘present a plan to the official receiver’ to regain control of the business.
Gareth Stace, director general of trade body UK Steel, called for a new owner to be ‘found quickly’ but urged ministers to ‘push on trade defence and reducing the burden of energy costs so that the Speciality Steels business, and the rest of the UK steel ecosystem, is sustainable.’
A Government spokesperson said: ‘It is now for the independent Official Receiver to carry out their duties as liquidator, including ensuring employees are paid, while we also make sure staff and local communities are supported.’
