An agreed offer to purchase British Steel should come as welcome news after the business failed to secure a £30m rescue package from the government earlier this year.
The bid was made by Ataer Holding, the investment arm of OYAK – Turkey’s largest professional pension fund, including the Turkish armed forces.
Its industrial holdings include co-owning automotive brand Oyak-Renault, and Turkish steel producer, Erdemir.
According to a statement published on OYAK’s website, the acquisition is expected to help the OYAK Maden Metallurgy Group increase “its effectiveness in the value chain and the weight of value-added products in it final product portfolio”.
The statement also said that its priority would be to ” increase the production capacity” and to “invest in clean steel production in British Steel”.
A detailed financial, legal and operational review is now due to take place, a process which should take around two months until the end of October. The official handover is expected to be held before the end of 2019.
UK Steel in Numbers (courtesy of UK Steel/Make UK):
British Steel entered compulsory insolvency in May 2019 due in large part to increased competition from cheap imports from China and a downturn in orders. Almost 80 bids were made for the business, particularly from European steel producers.
The insolvency came as a significant blow for the company, its workforce and the communities across the UK that its work supported. British Steel employs more than 4,000 people directly – most of which are based at its Scunthorpe blast furnace steelworks, but it’s estimated to indirectly support around five-times as many through its supply chain.
“British Steel does not sit in isolation but is a critical part of the UK’s wider steel sector, a strategic British industry underpinning a myriad of supply chains,” explained Gareth Stace, director of UK Steel – the trade body for the sector.
Commenting at the time, Stace noted that long-standing domestic issues such as uncompetitive electricity prices and business rates continued to chisel away at investment, alongside continued uncertainty over the UK’s trading relationship with EU, and action on these issues, as part of the government’s Industrial Strategy, must be a top priority.
“Ataer requiring more steel for its ‘downstream’ plants, means production in the UK could increase post-sale, which would be very good news for the domestic workforce. The sale could also open the door to more export opportunities in Europe,” according to John Cullen, business recovery partner at accountancy firm Menzies LLP.
Despite the challenges the steel sector faces, the outlook for demand and consumption in the UK and globally, remains positive, with economies around the world demanding ever-greater volumes of steel.
A government-commissioned study detailed an additional £4bn a year opportunity for the sector in the UK alone. Therefore, in order to avoid history repeating itself, a bold new vision for British Sector and the broader sector must be agreed as soon as possible.
Describing today’s announcement as being “enormously positive news”, Gareth Stace noted that there is “much work still be done” in order to secure a sustainable future for “this cornerstone of British industry”.