Last week British Steel needed a £30million loan from the government to avoid collapsing, but talks stalled and no loan was made.
The business went into liquidation, risking thousands of jobs and sparking the search for potential buyers, reports Perspecs.
The government will keep British Steel running until a suitable owner is found, but they do not intend to nationalise the business. Is there a chance it can be saved?
The Claim
The BBC reports that hope for British Steel comes in the form of more than 80 potential buyers, with at least 60 having signed non-disclosure agreements in preparation for a bid.
The official receiver for British Steel said "good progress" had been made in finding new ownership to save the business.
They also stressed that staff were still being paid and would still have jobs for the time being, with "good support" from customers following the news of liquidation.
Network Rail has increased orders from British Steel to help it get through the difficult period. The company makes 100,000 tonnes of steel every year for the railways , supplying 95 per cent of train tracks in the UK.
With plenty queuing up to declare an interest in buying British Steel and customers sending more work their way, it might not be long before the business and employees return to stability.
The Counter Claim
However, the clock is ticking for British Steel, with the Daily Mirror reporting that a buyer needs to be found in the summer or the business will go under.
There may be many who are considering a bid but there have been no formal approaches yet, and the government considers many interested parties not to be serious options. They would also prefer to sell the entire business to one buyer rather than break it up and sell it off piecemeal.
The government has reassured trade unions that it will prop up British Steel indefinitely while a buyer is sought, but sources from Whitehall have warned that backing could be more finite than expected.
The Financial Times reports that the government could withdraw support within two months, making the need for an interested party to step forward and formally buy British Steel all the more urgent.
According to the Sunday Telegraph the plug might be pulled even sooner than that, warning that the government hasn't got the money to keep British Steel going and will drop it in two weeks rather than two months.
The Facts
British Steel made a pre-tax loss of £20m last financial year, and it costs around £25m a week to continue operating. Any buyer will need significant cash reserves and a willingness to invest.
The business employs around 5,000 people directly, with another 20,000 jobs in the supply chain at least partly dependent on the company continuing to operate. Of British Steel’s direct employees, 3,250 work in Scunthorpe, and the community will be devastated if the business collapses.
The company was bought for £1 in 2016. Just last month it required a loan of over £100 million from the government to keep going, before borrowing another £30m, putting British Steel in a precarious position.
In trouble since the start of the year and facing liquidation, the Daily Telegraph reports that UK steelmakers are at a disadvantage in the global market. They cannot compete with countries like China in terms of quantity and are working with "eighties and nineties technology" against modern methods in other European countries.
In addition to the costs of buying the business, any investor would need up to £400 million to repay debts and around £50m in working capital just to keep it operating. Further investment would be needed to update equipment.
