Sanjeev Gupta moved part of Scottish loan away from struggling steel plant

Sanjeev Gupta’s UK steel business transferred a portion of a £7m taxpayer loan given to a struggling Scottish plant to elsewhere in the industrialist’s empire, according to people familiar with the matter.

The devolved Scottish administration lent the money in 2017 to the Dalzell plate mill in Motherwell, which Gupta’s Liberty Steel, the UK’s third-largest steelmaker, had acquired for a nominal sum the year before and recently reopened.

Just over £2m of the funds were then allocated for “intercompany loans”, according to an internal Liberty document seen by the Financial Times.

Liberty Steel Dalzell sent funds to elsewhere in GFG Alliance, the loose conglomerate of companies owned by Gupta and his family, the people said, even as the Scottish plant struggled for cash after reopening.

Dalzell and its nearby sister plant, Clydebridge, are Scotland’s last two major steelworks and together employ about 140 people. During the Covid-19 pandemic, Liberty’s Dalzell unit stopped making interest payments on the £7m loan.

GFG declined to comment.

Gupta’s promise of resurrecting moribund metals plants garnered widespread support from Scottish politicians. The Holyrood government provided a £575m guarantee when the industrialist acquired Britain’s last aluminium smelter in Lochaber, together with two hydropower plants, from Rio Tinto in 2016.

However, the metals magnate is now battling to secure new financing for his empire after Greensill Capital, its main lender, collapsed into administration in March.

UK business secretary Kwasi Kwarteng said last month that the government would wait and see if Gupta could refinance his UK operations before deciding whether to step in. Liberty Steel has about 3,000 employees.

The government previously rejected Gupta’s plea for a £170m bailout, citing fears the money could be sent abroad. Kwarteng will be questioned by MPs this Tuesday about the future of Liberty Steel and any plans the government may have to intervene.

Efforts to secure fresh funding were complicated earlier this month after the UK’s Serious Fraud Office said it had started an investigation into suspected fraud and money laundering at GFG. GFG has denied wrongdoing and said it would co-operate with the probe.

The Dalzell plant in Motherwell was one of many bought by Gupta, a former commodities trader who spent a decade buying unloved metals businesses and turned GFG into an empire employing 35,000 people from Australia to the US.

Scottish Enterprise, the public agency responsible for the loan, said: “The purpose of the £7m loan was for general working capital and we are still in negotiations on the repayment of the loan.”

Additional reporting Sylvia Pfeifer