British Steel Ltd.’s three-year run as a company ended on Wednesday, putting 5,000 jobs at risk and piling fresh misery on the U.K.’s manufacturing base.
The company was put into liquidation by the U.K. High Court, which appointed Ernst & Young LLP to manage the process. Despite last-minute pleas for a government rescue and pressure from Labour lawmakers and unions to nationalize the steelmaker, a bailout was ultimately denied.
“We can only act within the law, it is clear that it would be unlawful to provide a guarantee or loan on the terms requested by the company,” said Prime Minister Theresa May. “The government has been working tirelessly with the company, with its owner Greybull Capital and its lenders to explore all potential options.”
The U.K. steel industry has long struggled to be profitable in the face of high energy and labor costs. British Steel was also hit by the fallout from Brexit, with some European customers concerned about possible tariffs on their orders. At the same time, the weak pound made importing ingredients, such as iron ore, more expensive.
“Having rescued the business from closure over three years ago, we have worked hard to bring this important company back on its feet,” private equity firm Greybull Capital LLP said in a statement. “The additional blows dealt by Brexit-related issues have proven insurmountable.”
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. Greybull 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.
The possible loss of thousands of manufacturing jobs is a blow to the U.K. government, which is also bracing for defeat in European elections on Thursday. U.K. Business Secretary Greg Clark said efforts to help the company were stymied by rules preventing state aid.
"Consecutive U.K. governments have failed to protect our proud steel heritage, and now this prime minister is overseeing its demise," said Tim Roache, general secretary for the GMB Union. “This is devastating news for the thousands of workers in Scunthorpe and across the U.K."
British Steel’s operations include two giant blast furnaces in the northern town of Scunthorpe. It directly employs about 5,000 people and another 20,000 are supported by its supply chain. North Lincolnshire, where the plant is based, voted 66% in favor of leaving the European Union.
The company 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.
Heavy industry in the U.K. has been in decline for decades as manufacturers move overseas to take advantage of cheaper labor costs. Sectors such as steel, coal mining and ship building have all but disappeared, taking with them the promise of well-paid, blue-collar jobs.
The average salary at British Steel is about 37,000 pounds a year, according to PayScale, a firm that analyzes compensation data. That’s well above the national average.
For now, the plants will continue to operate, the receiver said.
“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."
British Steel received some government assistance in the form of a 120 million pound loan (US$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.
British Steel makes about one-third of the U.K.’s steel, which already lags behind countries such as Belgium and Poland, not to mention the giants of the global industry such as China, Japan and India.
It’s a far cry from Britain’s Victorian heyday when the country made about 40% of the world’s steel. Today, the U.K. produces 7.5 million tons a year, about 0.4% of global production.