British Steel’s Chinese owner sets sights on Gupta’s UK plants

The Chinese owner of British Steel is interested in buying Sanjeev Gupta’s UK steel plants, setting up a potential geopolitical dilemma for Boris Johnson’s government.

Gupta has been struggling to secure new financing for his metals empire since its main lender, Greensill Capital, collapsed in March.

Jingye Group, which acquired British Steel in late 2019, has told government officials it is willing to step in to take on parts of Gupta’s Liberty Steel, the UK’s third-largest producer, if the industrialist fails to find fresh funding, according to several people familiar with the matter.

Liberty Steel employs about 3,000 people across the country, including 1,600 at three sites in Yorkshire, which produce high-grade speciality steel for aerospace and defence customers.

Jingye “wants to set up an empire in the UK and there have already been discussions with government”, said one person familiar with the Chinese company’s thinking, while stressing that talks remain at an exploratory stage.

One official confirmed that the government was talking to Jingye. “They have expressed an interest in Liberty assets in the future,” he said. “However, it is not the government’s job to be playing matchmaker at this stage.”

British Steel said it did not “comment on commercial inquiries”. BEIS, the business department, declined to comment.

Gupta’s efforts to find new financing have been complicated after the Serious Fraud Office last week said it was investigating his empire, GFG Alliance, for suspected fraud and money laundering. GFG has denied wrongdoing and said it was co-operating with the probe.

GFG on Wednesday said it was making progress in the refinancing, and Gupta has previously vowed that the UK steel plants will not close under his watch.

In the event Liberty collapses, the Johnson government does not want to nationalise its assets. However, ministers have indicated that they are prepared to use the playbook by which British Steel was rescued two years ago.

The government indemnified the Official Receiver for almost a year — at a cost of £600m — meaning taxpayers covered losses at the business until it was sold to Jingye in November 2019.

Since taking ownership of British Steel, Hebei-based Jingye has focused on returning the company to profit, promising to plough £1.2bn over a decade into upgrading facilities. It unveiled plans for a £100m investment in March.

Its operations have commercial ties with Liberty. Scunthorpe, its vast plant in Lincolnshire, supplies slab, a so-called “semi-finished product”, that is then sent for rolling to Liberty’s Dalzell mill in Scotland.

However, the prospect of a rescue by the Chinese group would probably prove controversial at a time of worsening relations between Beijing and London.

Ministers have criticised China’s government over its tightening of control in Hong Kong and treatment of the Uyghur minority in Xinjiang province. Last year Johnson banned Huawei, the Chinese telecoms company, as a supplier of 5G equipment in the UK.

Industry sources also cautioned that ministers might balk at the prospect of one company owning a big chunk of the country’s steel industry. An added consideration is that Liberty’s Yorkshire plants make speciality steel for nationally-sensitive customers in the aerospace and defence sectors.

Jingye is among a handful of groups to have expressed an interest, according to industry and government sources. JSW Steel, one of India’s largest steel groups, is another. Ravindra Rathee, JSW Group executive responsible for international business development, declined to comment.

News of Jingye’s interest came as business secretary Kwasi Kwarteng co-chaired a meeting on Wednesday of the UK Steel Council, including representatives from Liberty Steel and British Steel. Kwarteng has made clear that the government is keen to develop a long-term plan for the sector and to support its efforts to decarbonise.

Separately, the UK Trade Remedies Investigations Directorate, made an initial recommendation to extend steel safeguards for three years for most, but not all, products. The safeguards were put in place to prevent the flooding of UK markets with cheaper imports.