Chinese buyout marks new chapter in British Steel history

British Steel, which makes high-margin, long steel products used in construction and rail, would give Jingye access to European infrastructure market. (AFP)
Updated 13 November 2019

Chinese buyout marks new chapter in British Steel history

  • UK Steel calls it ‘positive news’ for the steelmaking industry

LONDON: A Chinese buyout marks a new chapter in the tumultuous history of steelmaking in the UK, which has been characterized by nationalization, privatizations and recurring crises.

Despite having an economy dominated by the services sector, steelmaking retains a special place in British hearts, where it is an enduring symbol of a bygone golden industrial age.

That explains the huge interest in Monday’s announcement of a buyout of British Steel by China’s Jingye, which made national headlines even with an election campaign in full swing.

The takeover should be a breath of fresh air for some 4,000 British Steel employees, most of whom work at the Scunthorpe site in northern England.

Professional body UK Steel called it “positive news for British Steel and its workers,” assessing it would go toward “delivering a sustainable future” for the industry.

Jingye for its part has promised to invest £1.2 billion (€1.4 billion, $1.5 billion) over the next decade, without elaborating on how it will turn around the loss-making firm.

FASTFACTS

•China’s Jingye has promised to invest $1.5 billion over the next decade.

•The takeover is seen as a breath of fresh air for some 4,000 British Steel employees.

•British Steel has its roots as far back as the Industrial Revolution but took shape in 1967.

“It’s not a huge investment,” said Jonathan Owens, director of the business and management program at Salford University, and a former worker at British Steel.

“My worry would be that it is only a short-term investment. Are they just buying the knowledge of the high-quality steel production that goes on at Scunthorpe?”

So far Jingye has only said it would keep on as many employees as possible, without committing to a figure, and said cost-cutting would be necessary. It is difficult to say if the Chinese group will succeed where others have failed to ensure a future for British Steel, which is responsible for one-third of the country’s production.

British Steel has its roots as far back as the Industrial Revolution but took shape in 1967 when the Labour government nationalized the industry, which at the time employed nearly 270,000 people.

The 1980s were painful, as global demand declined and steel plants turned loss-making. A series of strikes saw the Conservative government under the “Iron Lady” Margaret Thatcher privatize the firm in 1988. That signaled the start of a long decline that involved deep cuts in the workforce, the closure of sites and the loss of the company’s name before Tata Steel bought it in 2007.

In 2016, the investment fund Greybull Capital bought part of its activities for a symbolic one pound.

Greybull Capital brought back the name British Steel for its long steel products business, mainly in rail and construction, hoping to make it a European leader. But the dream did not become a reality and it went bust in May this year.

The slump again reflected difficulties in the sector, which now employs no more than about 32,000 people and has been hit by fierce competition from China and uncertainty over Brexit cutting demand from European clients.

The relaunch of British Steel, which is the second-biggest steelmaker in the country, will face as much scrutiny as the future of Tata Steel, which currently holds the top spot.

The Indian giant has revealed little of its plans for the UK since the recent failure of a tie-up between its European business and Germany’s Thyssenkrupp, prompting fears for the future of Tata’s Port Talbot plant in south Wales.

Port Talbot employs some 4,000 of Tata’s 8,000 employees in Britain.

A third business is still trying to make its mark, the Liberty House group of the British-Indian tycoon Sanjeev Gupta.

He has quietly built up his portfolio, notably by buying out steelmaking firms in former industrial areas, and is reported to be interested in some British Steel assets.

Another potential investor is the government, although under the ruling Conservatives it has been quieter on big industrial issues in recent years.


S&P downgrades trio of Dubai developers as pandemic hits property and retail

Updated 46 min 21 sec ago

S&P downgrades trio of Dubai developers as pandemic hits property and retail

  • Gulf states are being hit hard by the coronavirus pandemic that has come at a time of weak oil prices

RIYADH: The credit ratings of three Dubai property companies were downgraded by S&P as the coronavirus pandemic hits confidence in the retail and real estate sectors.
S&P Global Ratings reduced the credit ratings for the real estate developer Emaar Properties as well as Emaar Malls to +BB from -BBB with a negative forward outlook, adding that it sees a “weakening across all its business segments” in 2020. S&P also cut its rating for DIFC Investments to +BB from -BBB, while keeping a stable outlook.
Gulf states are being hit hard by the coronavirus pandemic that has come at a time of weak oil prices, heaping pressure on governments, companies and employees.
The ratings agency expects the emirate’s economy to shrink by 11 percent this year
“The supply-demand imbalance in the realty sector appears to have been exacerbated by the pandemic. We now expect to see international demand for Dubai’s property to be subdued, and the fall in residential prices to be steeper than we had expected, lingering well into 2021” S&P reported.
Despite easing restrictions and the opening of the economy, S&P said that overall macroeconomic conditions remained challenging.
Global travel restrictions and social distancing constraints “significantly weigh on Dubai’s tourism and hospitality sectors” the rating agency reported.
Still, Dubai’s tourism chief was upbeat on the emirate’s prospects when international tourism resumes.
“Once we do get to the other side, as we start to talk about next year and later on, we see very much a quick uptick. Because once things normalize, people will go back to travel again,” Helal Al-Marri, director general of Dubai’s Department of Tourism and Commerce Marketing told AFP in an interview.