British Steel Ltd.’s three-year run ended as one of the UK’s only two main steel producers collapsed on Wednesday, putting 5,000 jobs at risk.
The company failed to get a last-minute rescue deal from the government after running into a cash crunch from Brexit uncertainty, as well as high energy and labor costs. It was put into compulsory liquidation in the UK High Court and Ernst & Young LLP was appointed to manage the process.
“The company in liquidation is continuing to trade and supply its customers while I consider options for the business," the official receiver said in a statement. "Staff have been paid and will continue to be employed."
The news today marks the demise of a company that was created in 2016 and renamed to invoke memories of the once-government-owned national champion. Private equity firm Greybull Capital LLP bought the assets from India’s Tata Steel Ltd. in a deal that cast the family firm as a potential savior of the long-struggling industry.
British Steel operates two giant blast furnaces at Scunthorpe in northeast England specializing in steel for construction and rail lines. It makes 2.8 million tons of steel a year and products have been used in buildings including The Shard skyscraper in London, Hudson Yards in New York and Petronas Towers in Kuala Lumpur.
"Consecutive UK governments have failed to protect our proud steel heritage, and now this prime minister is overseeing its demise," said Tim Roache, general secretary for GMB.
British Steel received some government assistance in the form of a 120 million pound loan ($156 million) to cover costs related to the European Union’s carbon trading program. But it wasn’t enough. Just last week, the company was in talks for additional funding from the government.
“The government can only act within the law, which requires any financial support to a steel company to be on a commercial basis. I have been advised that it would be unlawful to provide a guarantee or loan on the terms of any proposals that the company or any other party has made,” said UK Business Secretary Greg Clark.