Britain’s second-largest steel producer is preparing for an insolvency to occur within the next 48 hours, amid fears a bid for a rescue loan from the government will fall through.
British Steel is said to be formulating a strategy to collapse into administration, with EY expected to be formally appointed to handle the process tomorrow unless a deal is struck by this afternoon, Sky News reported late last night.
British Steel has been in talks with the government to secure an emergency loan of £75m, which insiders said had been reduced to around £30m as lenders and shareholders such as Greybull Capital agreed to stump up the extra cash.
The industrial giant’s collapse would create more than 4,000 redundancies at its Scunthorpe steelworks, job cuts at its other sites, and leave up to 20,000 more jobs in its supply chain also in crisis.
It follows the axing of about 10 per cent of its Scunthorpe workforce in autumn last year, in what British Steel said was an attempt to "streamline" its operations and prepare itself for the future. The steelworks is the biggest supplier to Network Rail, producing around 2.8m tonnes of steel each year.
Lenders are also understood to have released their security in order for a new government loan to be made on secured terms.
The emergency cash call comes days after British Steel suggested it had enough liquidity to continue operations for the foreseeable future, saying it was “grateful” for the government’s support.
"As the business navigates the significant uncertainties caused by Brexit, and explores options to strengthen the business for the long term, we are pleased to confirm that we have the required liquidity while we work towards a permanent solution," it said.
"We are grateful for the support that our stakeholders and the British government have provided to date."
British Steel declined to comment.