Yahoo Finance Liberty Steel seeks £170m bailout from UK government to avoid collapse
Britain's third largest steelmaker has asked the UK government for £170m ($234m) in financial support as it is on the brink of collapse.
Sanjeev Gupta's GFG Alliance said the bailout was necessary to pay day-to-day operating costs and absorb recent losses, in a letter to the Department of Business, Energy and Industrial Strategy (BEIS).
The government has been locked in discussions with Liberty Steel. Business secretary Kwasi Kwarteng has met with company bosses and trade unions on several occasions over the crisis at the group.
On Wednesday, Kwarteng tweeted he "held another constructive meeting" with Community Union, GMB and Unite, which represent Liberty Steel workers. "I am monitoring the situation very closely and remain fully committed to supporting a competitive and sustainable future for Britain’s steel industry," he said.
A government spokesman said: “The government is closely monitoring developments around Liberty Steel and continues to engage closely with the company, the broader UK steel industry and trade unions."
The spokesperson added that it "has supported the steel sector extensively, including providing over £500m in recent years to help with the costs of energy. "Our unprecedented package of Covid support is still available to the sector to protect jobs and ensure that producers have the right support during this challenging time."
READ MORE: Liberty Steel to pause some UK production as it seeks funding deal
Trade unions have urged the government to consider nationalising Liberty Steel in effort to save thousands of jobs.
Unite Union on Saturday called on the government to do "everything that is necessary in order to preserve Liberty Steel and secure its long-term future."
Unite’s assistant general secretary Steve Turner said that steel was a "foundation industry and was essential for the recovery" of the UK economy from COVID-19.
A collapse could have a devastating effect on the steel industry in the UK, with as many as 5,000 jobs at risk, of which 3,000 are in the steel and aluminium businesses.
Gupta's empire has been marred with troubles in recent months after one of its major donors filed for insolvency, leaving GFG scrambling for cash.
GFG alliance, which employs 35,000 people globally, was put under pressure after Greensill Capital entered administration earlier in March. Liberty Steel, a subsidiary of GFG, owns nine steel sites across the UK.
Greensill, advanced hundreds of millions of pounds to firms linked to Gupta's using a state-backed coronavirus lending scheme, the Financial Times said.
WATCH: Collapse of finance company Greensill Capital leaves thousands of steel jobs in the balance
The London-based finance group also underwrote the expansion of GFG Alliance and its Liberty Steel subsidiary to the tune of several billion pounds. It also funded the firm through supply chain financing, advancing funds against future customer invoices issued by GFG.
The news follows Liberty Steel's announcement last week that it would pause some production at its UK plant as employees get ready to be furloughed for up to a month as it seeks a funding deal to save the business.
Two weeks ago, around 180 workers at the steel maker's plant in Rotherham, South Yorkshire, were put on furlough under the government’s COVID-19 support scheme. While some of the 660 staff at the site were told they may not be able to return to work until 14 April.
Gupta told the bosses of firms at his steel empire to keep cash in the business and “reduce their call on group resources” as he attempted to agree a deal over debts owed to collapsed lender Greensill Capital.
