City and industry welcome for proposed British Steel deal
13 Nov 2019
News of negotiations between British Steel and the Chinese Jingye Steel company has been greeted with relief in industry and the City.
UK Steel director general Gareth Stace and a spokesman for leading accountancy firm Menzies LLP welcomed the move as a major step forward but said both Government and the wider economy could influence the likelihood of success.
Said Stace: “While there remains much work still to be done, today’s announcement is a huge hurdle overcome on the way to delivering a sustainable future for this cornerstone of British industry.
“A commitment to long-term investment and production in the UK is absolutely essential and naturally must sit at the heart of any purchase that now goes ahead. Government support will be critical in helping to deliver this and its efforts and interventions already provided to date are to be much welcomed.
It was important he added that the longer term picture for the entire UK steel sector was taken into account too, with a move from a reactive approach, to one “in which a shared, long-term strategic vision sits front and centre”.
Meanwhile Cullen – business recovery partner?at Menzies – cautioned that achieving a whole business sale in the current trading climate would be a challenging feat.
“There is some concern that the steel quotas introduced by the EU earlier this year, to protect the market from cheap imports, could be tightened further. Such protectionism, combined with the current Brexit uncertainty, is bound to be unsettling. However, Jingye Group seems confident that the acquisition has the potential to add significant value,” he explained.
Cullen added that, with steel consumption falling and weak performance across the manufacturing sector in Europe, cost cutting has not been ruled out. However he pointed out that Jingye’s was intent on expanding its operations outside China.