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Chinese buyer to revitalize UK giant

By ANGUS McNEICE in London | China Daily | Updated: 2019-11-13 09:51
British Steel's main production facility in Scunthorpe, Lincolnshire, Britain, earlier this year. [Photo/Agencies]

Following months of uncertainty, thousands of British Steel workers are feeling cautiously optimistic.

On Monday, the United Kingdom government said it was close to agreeing a deal that could save the company, a major manufacturer that employs 3,000 people in Scunthorpe in east England and another 800 in the north of the country.

If confirmed, the deal would see the ownership of British Steel transferred to Jingye Group, an industrial company based in North China's Hebei province.

"This is good news for everyone at British Steel and we are really hopeful that this will secure our future," said Paul McBean, who has worked in Scunthorpe in the industry for 45 years and who is a regional representative for the steel workers' trade union Community. "This is the kind of announcement we've been waiting for."

The government has been paying the wages of British Steel employees and seeking a buyer for the company since May, when it went into insolvency.

During the summer, Turkish company Ataer Holding emerged as a frontrunner to take over, until talks broke down in October.

The UK Insolvency Service has confirmed it is now working with Jingye.

"Completion of the contract is conditional on a number of matters, including gaining the necessary regulatory approvals," the service said in a statement. "The parties are working together to conclude a sale as soon as reasonably practicable."

The Sunday Telegraph reported the deal is worth 70 million pounds ($90 million), although the figure has not been confirmed by Jingye or the UK government.

Should the deal be completed, Jingye says it plans to revitalize the company with a substantial investment package, according to a company statement seen by the Grimsby Telegraph.

"Jingye plans to invest 1.2 billion pounds ($1.5 billion) in the business over the next decade in upgrading the plants and machinery, improving the new company's environmental performance and boosting energy efficiency to place the operations on a more competitive and sustainable footing," the statement reads.

British trade union Unite welcomed the news, noting that British Steel employs 5,000 people in the UK and Europe, and supports a further 20,000 in the supply chain.

"It appears we are close to a deal being concluded that ends the anxiety felt by thousands of workers," said Unite assistant general secretary Steve Turner, although he said there have been a series of "false dawns" in the search for a buyer.

"If and when a formal announcement is made, the workforce will begin to breathe a collective sigh of relief," he added.

British Steel has changed ownership on numerous occasions during its turbulent history. The UK government formed the British Steel Corporation in 1967 and the workforce at the time numbered almost 270,000.

The steel industry went through a period of privatization in the 1980s, and in 1999 British Steel merged with Dutch company Koninklijke Hoogovens to form Corus Group, before being sold to the Indian company Tata Steel in 2006.

A decade later, Tata sold its UK operations to investment company Greybull Capital. Tata said a number of factors contributed to a failure to generate sufficient profit in the UK, including decreased demand following the 2008 financial crisis, lower steel prices on global markets, and the cost of new EU climate change rules.

Under new ownership and rebranded as British Steel, the company continued to struggle with debt. In April, it asked the government for a 100-million-pound loan to pay European Union emissions fees, before falling into insolvency the following month.

Chris Bovis, a professor of international business law at Hull University, said Jingye's purchase could raise eyebrows, considering British Steel's recent struggles.

"People will say that former owners have not made money out of the company," Bovis said. "But I think it is an intelligent purchase, it's a clever way to penetrate the UK steel industry."

Bovis said the group will invest heavily in updating ageing equipment at the British Steel plants to ensure it meets modern emissions expectations.

The group will have then positioned itself to supply major infra structure projects in the UK, according to Bovis, such as those attached to the government's Northern Powerhouse development plan.

"They will bring the whole operation to modern standards," said Bovis. "The technology is old and desperately needs huge investment, which the Chinese company has. They will invest, and then link the production to infrastructure deals in the UK."

He added that the timing of the deal "is perfect too".

"They are getting the company when it is cheap, and when the government needs to off er good news, with a general election coming up and the UK's future competitiveness in question because of Brexit."

Li Ganpo, chairman of the Jingye Group, said there is a "long journey" ahead. "This combination will create a powerful, profitable and sustainable business," Li said in his company's statement.

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