British Steel sank to a loss of £140m last year, according to accounts that showed financial difficulties even after it was taken over by a new Chinese owner.
The UK company was saved from liquidation in 2019 when Jingye stepped in to buy it – for only £24m – after months of subsidised operations as the government pushed to find a buyer for an important industrial employer. Its previous owner, the private equity firm Greybull Capital, exited after only three years in charge.
British Steel employs about 3,000 people at a steelworks in Scunthorpe, north Lincolnshire, in one of the “red wall” constituencies that were a critical part of the Conservative party’s 2019 general election victory, with Holly Mumby-Croft deposing the Labour MP Nic Dakin.
The company lost £69 a tonne on 2.6m tonnes of steel produced during 2020, Jingye’s first year in charge, according to accounts filed at Companies House, underlining the dire state of the UK steel industry. It made revenues of £844m during the year.
The accounts showed a profit overall for the year of £295m, although that was only achieved through a £410m paper profit resulting from the £24m knockdown price for assets that were valued at £434m. Jingye, whose sprawling operations are otherwise mainly based in China, also lent its new British subsidiary £220m to use as cash to run day-to-day operations.
The drop in demand from automotive customers was a key factor in the £140m operating loss for 2020, as car factories were shut temporarily at the start of the coronavirus pandemic.
In the past year steel prices have soared as demand for infrastructure investments rose during the rapid economic recovery and supply failed to keep up after a few difficult years.
Yet British Steel has warned of difficulties in taking advantage of the boom. In September it said that surging energy prices meant it was impossible to make steel profitably at busy points in the day when energy demand was highest. It quoted a 50-fold increase in energy prices at some points in the day in September compared with April.
Energy costs account for as much as a fifth of the total manufacturing cost, according to UK Steel, a lobby group that argued earlier this month that high energy prices made the UK industry uncompetitive against rivals in the EU and beyond.
Jingye has promised to invest heavily in British Steel to improve its energy efficiency in a bid to cut costs as well as carbon emissions. On buying the company Jingye pledged to invest £1.2bn overall in upgrading British Steel’s assets. The accounts revealed only £38m of capital expenditure in 2020 as the pandemic delayed major projects, but they also highlighted plans for £123m of investment planned during this year.
British Steel is owned by a holding company, Jingye Steel (UK) Holding Limited, although the parent company is months late in filing its first accounts at Companies House, a legal requirement.
British Steel was approached for comment.
