UK government confident buyer will be found for Gupta’s steel factories

The UK government has expressed confidence that a private buyer can be found for steel factories put up for sale by metals tycoon Sanjeev Gupta despite concerns over the opacity of his business empire.

Gupta, whose GFG Alliance owns Liberty Steel, Britain’s third-largest manufacturer, put three plants up for sale on Monday as part of a wider restructuring prompted by the collapse of the group’s main financier, Greensill Capital, in March. GFG has also been hit by suspicions of fraud which the Serious Fraud Office is investigating. 

Liberty Steel said on Monday it was seeking to sell a speciality steel plant at Stocksbridge in South Yorkshire and smaller facilities at nearby Brinsworth and in West Bromwich, near Birmingham, as it aims to stave off a collapse of the wider group. The businesses being sold employ more than 1,500 people.

Kwasi Kwarteng, the UK business secretary, told the House of Commons business select committee on Tuesday that these were “good assets” which ought to find a private sector buyer.

“They are putting assets up for sale, they wouldn’t be doing that if they didn’t think there were buyers in the market,” he told the MPs. “The assets are good assets, the workforce is dedicated, the managers of the plants are very experienced and I’ve spoken to them very frequently.”

Nationalisation, he added, “is an extreme occurrence which is unlikely to happen”. 

Kwarteng said that concerns about Liberty had been centred around GFG’s “opaque” use of leverage and financial engineering. “Without that, there’s a healthy interest in the assets and they have a viable future,” he said.

Kwarteng turned down a request for a £170m bailout by GFG earlier in the spring, citing the company’s opacity and because “it wasn’t clear this money would stay in the UK”.

He admitted that politicians around the world had been tempted by Gupta’s promise to revive unloved metals businesses. “Someone comes and says they have the magic formula to keep steel jobs going . . . there’s a temptation for government involvement,” he said.

But he said he had been vindicated in his decision not to use taxpayers’ money to rescue GFG. “It was a good call. It was the right judgment.”

Despite Kwarteng’s optimism, the list of buyers for the plants is unlikely to be long, according to industry sources, who said it was not clear what value, if any, would be realised by a sale of Stocksbridge.

The aerospace and automotive industries are major customers of the plant and demand for their products has plummeted due to the pandemic. Instead of an outright sale, another option being examined could be a joint venture with a third party, the sources said.

National security concerns are also likely to feature, given the nature of the plant’s customers. 

Even before Stocksbridge was formally put up for sale, some steel industry experts had suggested that one solution could be to combine Stocksbridge with Sheffield Forgemasters to consolidate the speciality steels sector in the UK. The Sheffield-based company makes the castings that encase the nuclear reactors in Britain’s Trident submarines.

David Bond, Sheffield Forgemasters chief executive, played down the likelihood of a combination. The company, he told the Financial Times, “has not engaged in discussions with any parties over a suggested combination with Liberty Steel’s Stocksbridge plant”. 

Kwarteng said that steel assets in the UK had regularly been “flipped” in recent years, often between financial companies rather than experienced manufacturers. He said the government wanted to put the industry on a firmer footing, for example by encouraging the development of “clean steel” production.

Industry representatives, however, warned that successive governments had failed to put in place a long-term strategy for the sector.

Roy Rickhuss, general secretary of the Community trade union, told the committee that one of the requests the industry has put forward repeatedly was “about an industrial strategy [to enable] steel to play this role as a foundation industry”. 

Gareth Stace, director-general of trade body UK Steel, told the MPs that while the current government was “more engaged” with the sector than many previous ones, action was still needed to ensure its competitiveness. In particular, the industry wants to see action on business rates and energy costs, which it says are significantly higher than those of continental rivals.