British Steel is on the verge of administration as it continues to lobby for government backing, sources say.

The UK’s second-biggest steel maker had been trying to secure £75m in financial support to help it to address “Brexit-related issues”.

If the firm does not get the cash it would put 5,000 jobs at risk and endanger 20,000 in the supply chain.

Company sources said that the direction of talks with the government would become clearer in the coming hours.

British Steel’s main plant is at Scunthorpe, but it also has a site in Teesside.

The request for emergency financial support from the government is understood to have been reduced from £75m to about £30m.

The report said British Steel shareholder Greybull Capital and lenders had agreed to pump new money into the firm.

Unless a deal is reached by Tuesday afternoon, the firm could go into administration within 48 hours. EY would be expected to be appointed as administrators on Wednesday.

If a company goes into administration, then the insolvency practitioners appointed to run the business will try to rescue it by selling it, or parts of it, as a going concern.

But if that is not possible it will be liquidated, meaning that it will be closed down and its saleable assets will be sold.

In a statement, the Department for Business, Energy and Industrial Strategy (BEIS) said: “As the business department, we are in regular conversation with a wide range of companies.”

In April, British Steel borrowed £100m from the government to enable it to pay an EU carbon bill, so it could avoid a steep fine.

Tough decision for the government

Sources close to Greybull Capital say its lenders have told them that unless they can secure a £30m lifeline they will pull the plug on British Steel tomorrow.

The timing of this could hardly be worse for the government coming as it does right before the European elections.

Cynics might suggest that Greybull is not unhappy with the timescale of the plea.

Business Secretary Greg Clark has a very tough decision, as I’ve already written.

The question may be whether the government can put this down to Brexit mitigation and tap the same source of contingency funds Chris Grayling disastrously used to procure emergency ferry capacity.

At least there would be an immediate dividend – to stave off the collapse of a firm that employs 4,500 people directly and has 20,000 more at risk in the supply chain.

However, having already lent £100m to cover a genuinely Brexit-related carbon emissions bill – further assistance to a private company struggling in a deeply challenged industry may be a precedent they would rather not set.

Slump in orders

Last Thursday, British Steel said it had the backing of shareholders and lenders and that operations continued as usual while it sought a “permanent solution” from the government to its financial troubles.

It is understood that along with administration, nationalisation or a management buyout are being discussed as fall-back options for the company.

British Steel’s troubles have been linked to a slump in orders from European customers ‎due to uncertainty over the Brexit process.

The firm has also been struggling with the weakness of the pound since the EU referendum in June 2016 and the escalating trade US-China trade war.

One of its biggest customers is Network Rail, 95% of whose rails are supplied by British Steel’s Scunthorpe plant.

The recent history of the UK steel market goes back to 2007 when India’s Tata conglomerate entered the market after acquiring the Anglo Dutch group, Corus. In 2010 it was renamed Tata Steel Europe.

After a difficult few years and restructuring attempts, Tata pulled out of the UK steel market, selling the Scunthorpe long products division to private equity firm Greybull Capital for a nominal £1.

Greybull’s rescue came during the depths of the steel crisis in 2016 and saved more than 4,000 jobs.

It then rebranded the company as British Steel and recently returned it to profit.

On Monday, the government, trade unions and employers signed a UK Steel Charter in Parliament. The charter calls on the government and large companies to buy British to boost UK industry.

The GMB union said it had written to British Steel on Tuesday demanding that the firm works with the government to save the Scunthorpe steelworks.

GMB national officer Ross Murdoch said: “Given this latest speculation, these are understandably extremely difficult times for our members.”

“Yesterday the government, alongside trade unions and employers, signed a UK Steel Charter at Westminster. They must now put their money where their mouth is.

“GMB calls on the government and Greybull to redouble efforts to save this proud steelworks and the highly skilled jobs.”

The shadow minister for steel, Gill Furniss, called on the government to intervene, saying the UK steel industry was critical to the UK’s manufacturing base and strategically important to UK industry.

“Administration would be devastating for the thousands of workers and their families who rely on this key industry in a part of the country which has not had enough support and investment from government over decades,” she said.

BBC

US car giant Ford has announced it will cut 7,000 jobs globally by the end of August in an effort to save costs.

The plan will reduce Ford’s salaried workforce by 10% and will be made through both voluntary and forced redundancies, according to the firm.

Ford said the plan, which includes 2,300 cuts in the US, will save the company $600m (£471m) a year.

It is the second major US carmaker to announce redundancies, following GM which is shedding 14,000 posts.

Ford is already making cuts in Europe as part of a shake-up first revealed at the beginning of the year.

In March, Ford said it would axe 5,000 jobs in Germany, including hourly, salaried and temporary staff.

But it is not yet clear if and how the plans will affect workers in the UK, where Ford employs about 12,000 people.

Ford’s chief executive Jim Hackett said: “The total number of positions impacted in the UK is still to be determined.”

In a letter to workers Mr Hackett said that as part of the new wave of cuts, management positions would be targeted.

“To succeed in our competitive industry, and position Ford to win in a fast-changing future, we must reduce bureaucracy, empower managers, speed decision making, focus on the most valuable work and cut costs,” he said.

He added that the reorganization was designed to help the company create “a more dynamic, agile and empowered workforce, while becoming more fit as a business”.

When GM announced its own job cut plans in November last year, the company’s chief executive, Mary Barra, said the cuts were about making the car manufacturer “highly agile, resilient and profitable”.

Of the total 14,000 redundancies at GM, some 4,000 jobs have been lost in the US.

‘Difficult and emotional’

Mr Hackett said that due to a change in company practice, workers losing their jobs would now be allowed to stay on for a few days and bid their co-workers farewell instead of having to leave Ford straight away.

“Ford is a family company and saying goodbye to colleagues is difficult and emotional,” he said.

“We have moved away from past practices in some regions where team members who were separated had to leave immediately with their belongings, instead giving people the choice to stay for a few says to wrap up and say goodbye.”

BBC