Britain’s third-largest steelmaker was on Thursday put under government control after a judge branded its owners ‘hopelessly insolvent’.
A High Court judge granted a winding-up order against Speciality Steel UK, owned by Indian-born metals tycoon Sanjeev Gupta’s Liberty Steel group, over long-term unpaid debts.
The Official Receiver was placed in control of the company’s plants in Rotherham and Stocksbridge, South Yorkshire, and Wednesbury, West Midlands, and talks were ongoing this evening between officials and trade unions over the future of 1,450 staff.
The judge, Mr Justice Mellor, said: ‘It is quite clear that there are special managers lined up who have the support of the government.
‘I consider by far the preferable approach is to make a winding-up order.’
The court heard Department for Business and Trade officials have received approaches from ‘independent third parties who have expressed an interest in returning some or all of the sites to steel making’.
There are two electric arc furnaces at Rotherham steelworks which have been mothballed since last July, while Stocksbridge has a smaller, specialised furnace which has remained in operation.
Workers, who make components for aerospace and defence companies, have continued to be paid by SSUK but now the government will cover their wages.
There were calls for the government to reverse its ‘net zero dogma’ in the wake of Liberty Steel’s collapse.
Tory Shadow Business Secretary Andrew Griffith MP said: ‘The collapse of Liberty Steel is the outcome of Labour’s ruinously high energy costs driven by net zero dogma.
‘British businesses cannot go on like this any longer.
‘As well as lower taxes, we need the government to exploit the cheap energy resources the UK already has.’
It is the second intervention by the government in the steel industry this year after ministers took control of British Steel – which runs the country’s last blast furnaces at Scunthorpe, North Lincolnshire – from former owner Jingye in April.
There were fears the Chinese company would turn off the furnaces after rejecting proposed government subsidies to continue operating and build a new electric arc furnace.
Cambridge-educated Gupta’s financial woes date from 2021, when lender Greensill Capital collapsed. Its administrators have since been trying to recover £3.3bn lent to Gupta Family Group (GFG) Alliance.
GFG Alliance has been under investigation by the Serious Fraud Office since 2021 over claims of suspected ‘fraudulent trading and money laundering’.
Lawyers for Gupta made a plea for more time to attempt a ‘pre-pack’ administration, being put together by investment manager Begbies Traynor, allowing him to buy the business out of insolvency while reducing its debts.
But Mr Justice Mellor found SSUK was ‘hopelessly insolvent’ with just £600,000 in the bank and a monthly wage bill of £3.7m.
Gupta’s parent company has 15 entities in insolvency proceedings across nine jurisdictions, the court heard.
Chris Williamson, Community steel union representative at Rotherham, called for the government to consider renationalising the business and managing it alongside Scunthorpe.
He said: ‘It would make sense. They (Scunthorpe) only have a certain lifespan in the blast furnaces but we’re ready to go with an electric arc furnace.’
Mr Williamson added he was ‘hopeful’ for the survival of the business.
Jeffrey Kabel, Liberty Steel’s Chief Transformation Officer, called the court ruling ‘irrational… when we have support to resume operations and facilitate creditor recovery’.
He added GFG had ‘pursued all options to make SSUK viable’ and invested nearly £200m in the steel firm.
Mr Kabel pledged to ‘present a plan to the official receiver’ to regain control of the business.
Gareth Stace, director general of trade body UK Steel, called for a new owner to be ‘found quickly’ but urged ministers to ‘push on trade defence and reducing the burden of energy costs so that the Speciality Steels business, and the rest of the UK steel ecosystem, is sustainable.’
A Government spokesperson said: ‘It is now for the independent Official Receiver to carry out their duties as liquidator, including ensuring employees are paid, while we also make sure staff and local communities are supported.’