Kleinman: Government must steel itself for share of blame
Few economic symbols speak more powerfully to a nation’s sense of self-worth than the decline of its heavy industries: just look at the justifiable angst surrounding the collapse into insolvency this week of British Steel.
The crisis engulfing a company on which close to 25,000 people’s jobs depend would be tragic at any time; the Government’s culpability in fomenting a toxic business environment that has led to the potential demise of British Steel makes it particularly so.
The prospects of a rescue from receivership look bleak. Brexit uncertainty, escalating trade tensions and international price competitiveness make the UK steel industry an unappealing investment prospect.
The virtually meaningless “Steel Charter” hailed by ministers this week as evidence of their enthusiasm for the sector was an insult to thousands of workers who have long required a genuine commitment under the industrial strategy.
Such is the disarray in Whitehall that the search for another scapegoat appears to have been as urgent to some of business secretary Greg Clark’s officials as the quest for a solution.
And who better to alight upon than Greybull Capital, and the millions of pounds in management fees it has been paid since acquiring the business from Tata Steel in 2016 for a solitary pound?
Greybull’s critics have it that its investments are structured on an unloveable basis, with relatively little of its own money at risk. Moreover, they say, we’ve been here before: Rileys, Mylocal and Monarch Airlines are all examples of Greybull-backed companies that have fallen by the wayside.
To others, though, that’s a wilfully blind interpretation of the firm’s approach, and ignores the roughly £200m in taxes paid by British Steel in the three years since it was saved from the brink of closure. It ignores the fact that Greybull’s management fees from British Steel are estimated to be a tenth of those taken by Tata. And it ignores British Steel’s history of failure under a prior succession of corporate owners.
One thing is certain: a decline in sales of 35 per cent this year at British Steel is principally the result of political incompetence, not the avarice of investors.
Greybull has been in talks with ministers since February about securing financial assistance to cope with the impact of Brexit on the UK steel sector. And despite reports to the contrary, I understand that the private investment firm offered to release its security over British Steel’s debts in order to clinch a taxpayer rescue package.
Scapegoating Greybull offers a convenient smokescreen for a Government without direction or purpose. But the firm’s founder, Marc Meyohas, is right that successful economies need
investors who are prepared to endanger their reputations by attempting to turn around struggling companies.
It’s no coincidence that two of the sectors in which Greybull has invested – aviation and steel – are littered with corporate carcasses. It may well find its ability to do business hampered by this latest crisis. What a pity that similar accountability is so rarely visible in Whitehall.
Triton with Thomas Cook
Thank goodness flights with Thomas Cook are calmer than the journey its shareholders are enduring right now.
The travel group’s freefalling valuation has both accelerated and arrested this week amid credit rating downgrades and reasurances from management that it has “ample” financing to continue operating through the peak summer period.
Reports that Thomas Cook was “risking collapse” – without any accompanying journalistic evidence – were shockingly irresponsible, given that consumer-facing businesses rely on that fragile thing, customer confidence, to remain aloft.
My revelation yesterday that Thomas Cook has been approached by the private equity firm Triton about a takeover of its Nordic operations
underlines the levers that its board still has to pull.
Central to the benefits of any deal, of course, will be the price that Triton is willing to put on the table. My hunch is that a deal will get done, providing some urgently needed breathing space.
Taking a Knapman
Some might call him a glutton for punishment: a banker seconded to the City regulator during the financial crisis, returning to public service a decade later to advise the Treasury on post-Brexit trade relationships.
That neatly describes Henry Knapman, a UBS markets veteran who retired from the Swiss bank in December.
He has now turned up at the Treasury as a senior industry adviser, with one of his principal focuses the implementation of the Global Financial Partnerships programme announced by Philip Hammond in his Mansion House speech last year.
In the context of repeated – and justified – criticism that the Treasury draws insufficiently on City experience to inform policy-making, Knapman’s appointment is welcome. It seems odd, then, that officials are so reluctant to confirm details of his brief, citing his status as a civil servant as the reason for the department’s reticence.
Might the real motive for a misguided attempt at secrecy be the desire to avoid being seen to court bankers at a time when financiers are so firmly in Labour’s crosshairs?