British Steel has entered compulsory liquidation today with EY being appointed as special managers. Is British Steel the first real victim of Brexit? First, as a result of the delay in the UK’s divorce deal, the EU delayed granting carbon credits to British Steel necessitating a £120m loan from the government to stave off significant penalties in relation to its emissions targets. The directors now cite “Brexit-related issues” as the reasons for the failure of the business, with the on-going uncertainty over future tariffs and trading terms resulting in the company’s order book from Europe falling off a cliff.
Whilst politically this is a huge issue for the government, it is of more concern to the 4,500 employees directly employed by British Steel and the further 20,000 jobs in its supply chain which will be significantly impacted. The failure of the business is likely to have a knock-on effect upon a number of companies involved in the British Steel supply chain, which is not a good start for life outside the EU.
As stated in our earlier blog (https://www.restructuringmatters.com/2019/03/will-britain-be-open-for-business-post-brexit/#more-1877), a lot of British business is holding its breath until our future terms of trade with the EU are resolved – but that doesn’t appear to be any time soon. How many other British businesses will run out of steam before the terms of our departure from Europe are resolved?