Sanjeev Gupta has been engineering a quiet revolution in the UK and global metals sector, while simultaneously building an integrated presence in automotive and aerospace supply chains that will position his Liberty House as a key player in both.
The most outstanding example of that strategy is the planned alloy wheels factory at Lochaber in Scotland, where Liberty House bought the local aluminium smelter and the hydroelectric plant that powers it.
For the first time, UK automotive companies will be able to buy alloy wheels directly from a UK manufacturer. It is a remarkable and continuing record of achievement for Gupta and his team at Liberty House, which is part of the global GFG (Gupta Family Group) Alliance.
In steel alone, they are reviving what was once written off as a dinosaur UK industry, battered by competition from cheaper foreign competitors, and they will do it by recycling steel instead of making it from scratch.
Overseas, among many projects, Liberty House has restarted a steel plant in Kansas, while in Europe it is buying seven plants from ArcelorMittal, currently the world’s largest steelmaker.
In Australia, Liberty is working with SIMEC, the GFG Alliance energy company, to develop its presence in steel, mining and energy. It has also acquired Aluminium Dunkerque, the largest aluminium smelter in Europe.
Liberty House now has annual revenues of $15bn, is headquartered in London and has offices in Dubai, Singapore and Hong Kong.
In education, Sanjeev Gupta’s support for the Industrial Cadets scheme is laying the foundations for tomorrow’s industrial workforce, to remedy the damage done by a generation of neglect of the skills needed in heavy manufacturing.
It is an impressive record, which is why in 2018, Sanjeev Gupta was named as an ‘Exemplar’ in The Manufacturer Top 100.
You started Liberty House at university I understand.
Sanjeev Gupta: The launch of the business was indeed during my first year at Cambridge. It sounds quite unusual, but actually for me it was nothing special because I’d been in business all my life.
As quite a small child I’d been involved one way or another with my father’s and my grandfather’s businesses, going to the office, and generally helping out.
And between my A Levels and university, I took two years out selling bicycles in Turkey for my father.
Did you feel there was anything you had to prove or was it something totally natural to you?
People ask me all the time, “What else could you have done? What would you have been? What was your dream?” and I say – I never knew any different! I was born with this heritage and I fell in love with it from a very early age, it’s all I’ve ever wanted to do.
Liberty House started as a commodity trading company, but later in your career you decided to switch to manufacturing. What spurred that decision?
The true heritage of my family is manufacturing. I started a trading business while at college because I saw an opportunity to connect different parts of the world. The family had been used to doing business between India and Africa.
Being in Europe, I saw the opportunity of bringing another leg to that equation, which was very, very successful. And for a long time, that’s what I continued doing. But I was always involved with manufacturing, always in and out of steel mills, buying from steel mills, selling to other steel customers. I always dreamt of starting my own industries.
You did that by investing in the UK steel industry, against which, over recent decades, the tide has very much been set. You decided not only to swim against that tide, but to try to reverse it. What made you think you could do that? A bit quixotic perhaps?
Right now, it feels far from that because it’s all been a great success. But at the time – we’re talking about 2013-14 – it was probably one of the worst times in the history of steel.
There was a global crisis in steel –Redcar closed (in 2015, owned by Thai-based Sahaviriya Steel Industries, who had bought it from Tata Steel) and literally every steel company in the world was challenged, particularly the weaker ones, and those in countries like the UK were falling over, one after another.
To decide to restart the shutdown steel plant at Newport was therefore quite controversial. And it took me longer than I expected, if I’m very honest. When I bought Newport, I expected to be up and running within six, nine months, maybe a year.
It actually ended up taking over two years. And there were many moments of doubt, many moments, not only from outside the business but inside too, because we were burning money constantly.
Many of my senior execs would come up to me and say, “Maybe it’s time to let this one be. Maybe it wasn’t meant to be.” They thought I was obsessed. We had all these workers on half-pay for almost three years.
People asked me what’s the logic of this? What’s the point of continuing to burn money? Even I had a moment or two of reflection during that time, but I’m very happy that I stuck to my conviction. It’s proved to be a great success.
It is a different model to the past, it is a model about recycling steel, rather than making steel. This is, I think, the future of this country and the future of generations to come, because steel is not a perishable commodity. Once you make it, it stays with you forever; you just have to keep recycling it.
The world has accumulated steel since the Industrial Revolution. Eventually all of that steel has to be recycled. You don’t need to make steel anymore, you just have to recycle it.
So, recycling is the only way to bend the global steel industry back into profit?
No, it depends where you are. If you’re in a country like Australia, which has all the natural resources you need, like iron or like coal, it’s very much viable to make primary steel. And we are going to invest in that as well.
But in countries like the UK, where you have no iron, or no coal, all those resources have long been spent. To import those raw materials all the way across the world from Brazil, from Australia, to import almost four tonnes of raw material to make one tonne of steel, to me makes absolutely no sense.
We have accumulated almost a billion tonnes of steel in the UK, in our bridges, in our buildings, across the country – on and in the ground – all of which has to be recycled.
Today in the UK we generate about 10 million tonnes of scrap a year. Studies show that in the next 10 – 15 years, that availability of steel scrap will rise from 10 million to 20 million tonnes, so it will double the supply of steel scrap as we accelerate the recycling of steel.
Every building made of steel must eventually be torn down. As those buildings and bridges come to an end of their lives, the availability of steel scrap will rise exponentially over time. So, you never have to make steel in this country ever again if you just recycle what is already there in the system.
Recycling steel – ‘Greensteel’ as you call it – requires electric arc furnaces. Anyone who has an electric arc furnace is going to be able to compete against you. Are you concerned you might lose your first-mover advantage?
I actually quite encourage others to do this. We import something like six million tonnes of steel a year into this country, so there’s plenty of room for others to invest in this as well.
The more industry players we have, the better the environment becomes to generate skills, which is a critical deficiency. Our model requires new skills and there’s a shortage of new skills in the system.
Before we discuss skills further, why do you think no one else in the country had the kind of vision for steel that you had? Is it something about the UK, are we perhaps a bit defeatist about problems that have appeared intractable for so long?
No, it’s not that we’re defeatist. The UK is one of the most successful economies in the world. If you look at London, it’s got a monopoly in almost every financial service you can think of, it’s hugely successful.
The problem is that we broke the backbone of manufacturing in the 1970s when we started unwinding industry. The core purpose was not bad, right? I am a big fan of Margaret Thatcher, but nonetheless, I think that we broke the manufacturing spirit and we didn’t reinvent it.
We did in some ways of course – our automotive industry, for example, is pretty successful, so is biotech, so in certain industries we did reinvent ourselves, but in heavy industries, we basically gave up.
This perception has crept into people’s mind that Britain cannot be successful at heavy industries. Too expensive, labour is too expensive, we’re just not good at it, it’ll be done cheaper in Japan or China or elsewhere.
That meant there was no investment in this industry. There were no entrepreneurs, no young people who aspired to be in this industry like I did, born in my father’s steel mills. The City itself did not want to invest in heavy industry and the government did not want to encourage it.
You’re investing in companies downstream from your steel mills in the UK. What drives that philosophy?
We believe in being in every part of the value chain, starting from absolutely as upstream as you can, whether it’s having iron ore mines or your own energy plant, your own steel plants, aluminium plants, all going downstream to the components, which make cars or aeroplanes or defence.
And eventually, maybe making the finished product itself. That’s what we believe in, but in a decoupled way, not as some big corporate monolith. Each one of these businesses is an independent entity operated on what we call a ‘decoupled integrated model’.
It sounds like a long play; you believe in nurturing, fostering, and growing.
Steel production in this country has gone down to a fraction of what it used to be. Even more so, there’s been a decline in the manufacturing sector. Therefore, in terms of many of the components that go into a car for example, more than half of every car we make in the UK is actually imported.
We’re trying to reclaim some of that supply-chain gap. A very good example of this is our plant in Scotland, which is going to make alloy wheels. We make almost two million cars in the UK, but we make no wheels, they are all imported.
We have an aluminium smelter, we have liquid aluminium which comes out of that, which can go directly into a wheel. It’s a closed-loop model that means we won’t have all the current costs current wheel manufacturers have – making a block of aluminium, shipping it off somewhere else, re-melting it, recasting it, having scrap, having transport losses.
Now, everything will be done onsite in one place. We are reshoring many of the manufacturing activities that have been lost over time.
And of course, if we get the wrong sort of Brexit, raising the level of British-made parts in British-made cars is going to be absolutely critical, given WTO rules of origin that govern whether we can call a British car ‘British’?
If you’re an independent country, you need to have industry as part of a balanced economy, primary, secondary and tertiary. You cannot have an economy based just on the tertiary economy. You need to have all three.
Tell me about the project you support, aimed at helping young people into careers and manufacturing, the Industrial Cadets. It was an idea formed by your colleague Jon Bolton in the company of the Prince of Wales. The STEM marketplace is absolutely jampacked with initiatives. Why did you think there was room for more?
It goes back to what I said earlier, that there has been a hollowing out of skills over the past 30 or 40 years because we’ve not had people coming into our industry. If you’re a schoolchild, you don’t want to go into a steel plant. You want to go into banking, or you want to go into Fintech or you want to invent the next app for an iPhone – you don’t want to do heavy industry.
It means none of the children of the last generation or the current generation wanted to go into heavy manufacturing. Therefore, the whole concept of Industrial Cadets is not to solve today’s problem, it’s to solve tomorrow’s problem. It’s an investment in 20 years’ time.
We’re taking primary and secondary school children out of school, putting them into our plants, giving them exposure and training, showing them these manufacturing processes, which they get all excited about.
I know my six-year-old draws pictures of Daddy’s steel plant, he doesn’t draw pictures of Daddy’s bank. A child relates to real things in life. I related to real things in life when I was a child. So, if you can take a child into industry, it will leave an impression, it will inspire them to come into that business.
It’s a one-year programme, encouraging tomorrow’s generation to come into this industry basically. Today’s skills problem is addressed by STEM programmes, by apprentice programmes, by grad training programmes, all of which we also do as a corporate.
But I want my son, my children, when they grow up, to be in a workplace or in an environment where there is a plentiful supply of skill and of people who want to be in industry. That way, we will rebalance the economy so that manufacturing once again has a decent share of the economy.
You make the materials from which manufacturers produce many different, wonderful and beautiful things. Is there a manufactured product that you particularly admire, and does your choice say anything about you?
There are lots of things that I find amazing. I find the whole concept of manufacturing incredible. Technology has lifted poverty and brought better standards of living across the world. The way we live and everything we do is entirely based on manufacturing. Manufacturing is the essence of human civilisation.
Metals are obviously the core of that. But what I find quite amazing is the evolution taking place in the automotive and aerospace sectors. It is completely disruptive.
Actually, it’s entirely disruptive to my own industry! Because no longer do you have to use steel or aluminium, it could be composites, things that are stronger, lighter. That I find fascinating, which is why we are involved in developing our own ideas in automotive too.
I find the ability to disrupt my own industry the greatest privilege of all, because rather than trying to protect my industry, if I can actually disrupt it and do something completely different, maybe in the short-term there’s some consequences, but in the long-term, that is what evolution is all about.
That is what humanity is all about. I’d rather lead disruption, effect change, than be changed, right?
You project an enormously positive attitude, but is there any time when you’ve second-guessed yourself? You mentioned that perhaps doubt crept in when you were burning money in Newport, but do you ever second-guess yourself?
Absolutely. I mean there’s no way you can succeed in life without making mistakes. Anybody who thinks or says otherwise is fooling himself. You make mistakes constantly, but you learn from them. That is the whole concept again.
I keep harping on about evolution: it’s about trying. If you fail, you learn from your mistakes and you get up and you do it again and you do it differently and better. And through that process, you progress.
This was extracted from an audio interview with Sanjeev Gupta and edited for use in the magazine. The full audio interview may be heard here.
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