The proposed takeover of British Steel by Turkey’s military pension fund is in danger of collapse, after the government said it was preparing to open discussions with rival bidders.
Ataer Holdings, a division of Turkish army pension fund Oyak, has been in exclusive talks with the official receiver, the government official overseeing a sale it was hoped could save more than 4,500 jobs and the Scunthorpe steelworks, which makes 96% of all the UK’s railway tracks.
But a 10-week exclusivity period ends on Thursday, amid reports that Ataer’s interest has stalled because of difficulties in convincing British Steel’s suppliers to accept lower prices for goods and services.
“While discussions with Ataer are continuing, discussions with other parties who have expressed continued and renewed interest in acquiring the whole British Steel business will now be possible,” said David Chapman, the official receiver.
“I have instructed the special managers [the accountancy firm EY] to engage with these additional interested parties.
“Diligence team members from these parties are expected to visit the company’s sites over the coming days and weeks. Meanwhile, Ataer remain very much interested in acquiring the business and we remain in detailed discussions with them to conclude a sale.”
What went wrong at British Steel?
When Greybull Capital bought British Steel in 2016 it promised great things. The private equity firm pledged to invest £400m and within months it was boasting of a return to profit and a bright future ahead. Three years later it collapsed. In a letter to staff, the British Steel chief executive blamed weak market demand, high raw material prices, the weakness of sterling and uncertainty over the outcome of Brexit discussions.
How much is Brexit to blame?
It is not the only factor in the crisis but it is very important. Steel contracts are typically agreed well in advance of the product being delivered. As things stand, the UK is due to leave the EU on 31 October and the terms of that separation are yet to be agreed, meaning British Steel’s overseas customers do not know what tariffs will apply to steel they buy from the company. Sources close to the company said orders from customers in the EU and further afield have dried up as a result.
Can the company survive in some form?
While many of the fundamental problems affecting it remain, the prospective new owners, the Turkish military pension fund Oyak, appear committed to investing in expanding production and preserving large numbers of jobs – a key priority for the government. British Steel accounts for a third of UK production, so is seen as a key national asset in many quarters.
Is the whole UK steel industry in trouble?
The UK steel industry has been in decline for some time because of a variety of factors such as overcapacity in EU steelmaking and Chinese state-subsidised firms flooding the global market with cheap product. An industry that employed 323,000 people in 1971 now employs less than a tenth of that, at 31,900. The closure of the Redcar steelworks in 2015 was a significant blow to the sector and left the UK with only two blast furnace steelworks: Scunthorpe and the Tata Steel-owned Port Talbot in south Wales.
Liberty House, which is run by the steel magnate Sanjeev Gupta, is expected to rekindle its interest, while the Chinese firm Jingye is also thought to be waiting in the wings.
The Guardian approached Ataer for comment, but had received no response at the time of publication.
The shadow steel minister, Gill Furniss, said: “The Tories continue to treat our steel sector with contempt and their inaction is having a real impact on the lives of workers and their families.
“Five thousand direct jobs and many more in the supply chain depend on a deal going through. The government must do everything it can to ensure a responsible and credible buyer is found to secure the future of these important steelworks.”
She said Labour would “create a level playing field” for UK steel firms by bringing down energy prices, investing in technology and preventing foreign firms from dumping cheap steel on the market.
Oyak’s suitability as a buyer for British Steel has been called into question in recent weeks after trade union officials and MPs said they were concerned about its connections to the army and the government of Turkey because of its incursion into northern Syria.
The Guardian has previously revealed that Oyak was accused of corruption by a parliamentary inquiry in Turkey and that it planned to move a chemicals firm it owns out of the UK, at the cost of dozens of jobs.
The collapse of British Steel this year threatened the future of the Scunthorpe site, one of the last two blast furnace steelworks in the UK.
The government is understood to have offered buyers of British Steel grants, indemnities and loans worth £300m to support a deal that can save the site.
The Insolvency Service is funding the company’s operations in the meantime. This has increased pressure on finding a buyer because of the mounting cost to taxpayers.
“I remain focused on achieving a sale of the business and assets of British Steel as quickly as possible, to achieve the best possible outcome for the company’s creditors,” said Chapman.
“The conclusion of the exclusivity period allows us to consider all of the options available at this point in the process. I would like to thank the team at British Steel for their continued support and hard work during this period of uncertainty.”
