Insurance experts call for settlement of British Steel claim
23 May 2019
An ongoing dispute between British Steel and top insurers could help save the troubled company if it was settled, claims the firm which is representing BS.
Insurance governance experts Mactavish have been advising British Steel on its two year old claim against Zurich Insurance and others, dating back to an incident in 2017 when the firm was forced to close its Scunthorpe premises following damage to a blast furnace.
Mactavish CEO Bruce Hepburn stated: “Given British Steel’s current situation, settlement of this claim would have made a major contribution to securing the survival of this British institution that had finally been returned to profitability as a viable producer of high-end steel products.”
This week, the Official Receiver took control of British Steel as a first step in initiating the liquidation process. This followed the failure of weeks of effort by the firm and its shareholders, assisted by Government, to secure crucial funding.
Its problems have been blamed on continued Brexit uncertainty, the week pound and the effects of the escalating US-China trade dispute.
Nearly 5,000 jobs at the company will be affected, together with another 20,000 along the supply chain.
Mactavish has increased pressure on Zurich and others, stating that the dispute should have been settled long before British Steel went into administration. The steel company will continue to trade and attempts renewed to find a buyer.
Settlement of this claim would have made a major contribution to securing the survival of this British institution that had finally been returned to profitability
Bruce Hepburn, CEO, Mactavish
In a brief response, Zurich said it was reviewing evidence provided on behalf of British Steel. BS is also claiming damages to compensate for what it alleges was a slow response and incomplete investigation, said Mactavish.
Meanwhile, commenting on the prospects for the future of British Steel, director general of trade body UK Steel Gareth Stace said a statement of support from minister for business and industry Andrew Stephenson, for efforts to find a new buyer, provided “a glimmer of hope”.
“Many of the challenges we face are not unique to the steel sector – the whole manufacturing sector is crying out for certainty over Brexit, unable at present to plan with any accuracy the trading relationship it will have with its biggest market in just five months’ time,” he added.
“Economies around the world continue to require increasing volumes of steel and the UK sector stands ready and able to supply high quality products to meet this demand. Indeed, the Government’s study from 2017 showed an additional £4 billion a year opportunity for the sector in the UK alone.”
However, Freddy Khalastchi, business recovery partner at accountancy firm Menzies LLP cautioned against optimism.
“In the past we might have expected the Government to intervene to protect a major industrial employer and key supplier to the UK defence sector. However, we are in uncertain times and it is not clear whether it will be possible to tap into Brexit mitigation funds in this case,” he asserted.
“The fact that British Steel recently borrowed more than £100 million from the Government to pay an EU carbon bill and avoid further fines also suggests further intervention may be unlikely.
“Having failed to secure a last-ditch £30 million rescue package, regrettably there is unlikely to be a way back from the brink on this occasion.”