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Government must act to support crisis-hit UK steel industry

The steel sector cannot continue to lurch from crisis to crisis and action is needed now if the UK is to retain a resilient and competitive domestic industry, says the Business, Energy and Industrial Strategy (BEIS) Committee in a report published today.

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The report calls on the Government to establish a new Steel Sector Deal to address long-running challenges to the industry’s competitiveness, including those from high energy prices and barriers to supplying steel for major public projects, as part of a strategic plan for decarbonising the industry and protecting jobs.

In relation to Liberty Steel, the report notes a series of audit and corporate governance ‘red flags’ and concludes that:

  • Ministers should reflect on the systemic risks to the UK steel industry posed by such unusual corporate structures as those used by GFG Alliance
  • Liberty Steel owner, Sanjeev Gupta, put senior members of his staff in an unacceptable position by employing them with job titles associated with traditional executive functions in well run companies, without giving them the required access to information or decision-making powers necessary for them to perform their duties.
  • The regulatory authorities should undertake an investigation into King & King, the auditors of a number of GFG Alliance businesses, and
  • The Insolvency Service may wish to consider whether Mr Gupta has breached his fiduciary duties as a company director.

The Committee’s report urges the Government to consider formalising a fit and proper person test for private company directors within any future steel sector deal and that a review be undertaken to consider the systemic risks associated with high-risk financial practices in the steel sector.

Chair's comment

Darren Jones, Chair of the Business, Energy and Industrial Strategy Committee, said:

“Steel is a national strategic asset, a foundation industry, and a sector which the UK cannot afford to lose.

“There is an urgent need for Government support for the steel industry on long-standing issues including electricity costs and better use of public procurement to support steel in the UK. But the Government should go further by bringing forward a steel sector deal which helps UK producers compete internationally and provides the long-term, sustainable policy support necessary for the steel industry to transition to a low-carbon future.

“The systemic issues at the heart of GFG Alliance has highlighted the vulnerabilities of Liberty Steel and its place in the wider steel sector in the UK. We met with hard working and dedicated workers at Liberty Steel and want to ensure that the UK steel sector is able to continue to support their jobs. However, the evidence we heard during our inquiry has highlighted serious problems with high-risk financial practices, weaknesses in audit, and about inadequate accountability and corporate governance arrangements within GFG Alliance. Sanjeev Gupta must urgently fix these problems if he is to be seen as a fit and proper owner of steel companies in the UK.”

The report describes the use of high-risk financial practices as being at odds with the requirements of any future steel sector deal and recommends the Financial Conduct Authority and HM Treasury investigate the use of, and accounting rules for, future or prospective receivables.

The report highlights the audit of Liberty Steel UK businesses by audit firm King & King and questions their capacity to complete audits effectively. The report finds it “utterly unconvincing” that “King & King had the capacity, expertise, or resources to audit the accounts of multiple large GFG Alliance and Liberty Steel UK companies representing over £2.5 billion of revenue”.

The report notes that as a significant contributor of greenhouse gas emissions, decarbonising the steel industry will be an important part of meeting the Government’s target to bring all greenhouse gas emissions to net zero by 2050 and to cut emissions by 78% by 2035.

However, the report notes that the Government currently lacks a clear roadmap or overarching strategy for decarbonising steel. The report identifies a range of options for decarbonising the steel industry and finds the steel sector is holding off on investing in these technologies without certainty and direction from Government. The Committee recommends the Steel Sector Deal deliver a cohesive plan for decarbonising the steel industry and that it should be developed in response to the Steel Council's report later this year and announced no later than Summer 2022.

Further information

 

Channel website: http://www.parliament.uk/

Original article link: https://committees.parliament.uk/committee/365/business-energy-and-industrial-strategy-committee/news/158691/government-must-act-to-support-crisishit-uk-steel-industry/

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