Network Rail bids for parts of British Steel

Wednesday 03rd July 2019 06:41 EDT

Network Rail has made a bid for parts of British Steel ahead of an initial deadline for offers for the company, which collapsed into liquidation in May putting 4,500 jobs at risk. The company, which manages the UK's 20,000 miles of rail tracks, said it made the bid to avoid the possibility of losing one of its most important suppliers. The British railway system is heavily dependent on British Steel, which accounts for 97 per cent of the steel used in railway tracks.

Greybull Capital, the private equity investor under which British Steel collapsed, confirmed that it was also interested in a bid for parts of the company if a buyer for the entire operation could not be found. Potential bidders had until the end of Sunday to make offers, although it is understood that bids that came in after that point would still be considered.

Potential buyers reportedly include India's JSW and Evraz, a Russian steel and metals conglomerate part-owned by Roman Abramovich. The sale process is not expected to conclude this week, as discussions continue between bidders and the government Insolvency Service's official receiver.

Network Rail said, "We have made an indicative offer for some railway critical assets although our overwhelming preference is that a purchaser for the entire business is found. We are very clear that our offer will not undermine that. Our role is to safely run the railway for the millions of people who rely on it every day and we are exploring all options to make sure we can continue to do that.” The government-owned company said it would only pursue its offer if another buyer is not found.

British Steel collapsed in May after Greybull asked the government for £30m to help avert its collapse. The government declined to bail out the company, opting instead to look for a new owner. Greybull had bought Tata’s long products division in 2016 for £1 and revived the British Steel brand. The company quickly returned to profitability in the 2016-17 financial year, but has since struggled.

Greybull said that Brexit-related uncertainty had added to problems, with European buyers wary of committing to purchases that could be hit by tariffs if the UK leaves the EU without a deal. The spokesman said, “While we tried to create a viable long-term business, the challenging economic environment and the uncertainty caused by Brexit made that unattainable. EY are conducting a worldwide search for parties willing to invest in the entire group. If that search fails, we remain keen to rescue many of the activities of the wider business and offer sustainable employment for as many of the highly skilled workforce as possible."

Nic Dakin, the Labour MP for Scunthorpe, said Greybull should not be able to walk away with parts of the business. He said the company has some "serious questions to answer" over British Steel's collapse, adding that a spinoff of parts of the business to the company would be a "fairly outrageous outcome." Darkins said he hoped that the business would be preserved whole, preserving the jobs of the British Steel workers and a further 20,000 jobs in the broader economy.

Unite assistant general secretary Steve Turner said it would be an “economic and industrial disaster” for British Steel to close. As one of the UK’s last two blast furnace steelworks, the Scunthorpe plant is considered by many to be vital to preserving the UK’s defensive capabilities.

He said, "Should a responsible buyer for the whole of the company not be found then we would urge the government to bring the steelmaker under public control. Steel is a foundation industry and British Steel is a central pillar of UK manufacturing, sustaining communities and thousands of jobs."

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