- Tuesday, April 23, 2024
By: Shilpa Sharma
CONCERNS are growing over the future of Indian-born British businessman Sanjeev Gupta’s speciality steel business, as customers abandon it and resources are squeezed.
The business, which employs about 750 staff at plants in South Yorkshire, has been put up for sale by Gupta as part of restructuring of his sprawling GFG Alliance. The group has been scrambling for finance after the collapse of its main financier, Greensill Capital.
A presentation to local MPs and the business secretary Kwasi Kwarteng, seen by The Telegraph, has deepened worry regarding the deterioration of the steel business that may deter potential new owners.
The presentation titled “Project Fox”, shows that the unit had £80 million of working capital before Covid but is left with only a quarter of that and is “in need of urgent working capital to service customer commitments”.
Unable to buy the scrap metal to make steel, the business turned incompetent to meet orders, the newspaper quoted sources.
It also faces staffing issues, as Gupta furloughed about 70 per cent of workers, with taxpayers injecting more than £7m into the business as a result.
The speciality steel unit has resorted to only making products which are “prefunded” by customers paying in advance. Meanwhile stock is being sold off and not replaced to further boost cash.
The order book has now dropped to £30m, the presentation revealed.
Meanwhile, key customers including Rolls-Royce and aircraft engine maker Safran, are seeking alternative foreign suppliers, it warns.
“Lost customers will not return for multiple years, with alternative sources all being non-UK.”
It adds that “customers are not placing orders (and local teams not actively recruiting orders) due to our inability to supply and nervousness about business survival”.
“Speciality steel isn’t a business that can be mothballed and restarted. The government seems to think if it goes into administration it will be okay to start up again. Most of its work is long-term agreements with customers, but they are leaving and there are only weeks left to find an answer,” a source told The Telegraph.
Rotherham MP Sarah Champion said: “The question has to be asked why the speciality steel business furloughed so much of its workforce when it had such a full order book. A solution is needed now as there is not much time to save the jobs of its hundreds of employees.”
A GFG spokesman said: “GFG has stood by the speciality steel business, despite the Covid-19 crisis destroying demand for many products speciality steel makes. Like many businesses, GFG has made use of the furlough scheme.
“We have previously announced that the collapse of Greensill has required measures to be implemented to keep the business going, including requiring customers to fund orders.
“Progress is being made on all fronts and we are keeping stakeholders – including government and the workforce – informed of this process every step of the way.”
