Liberty Steel’s request for a £170m bail-out has been rejected by the UK Government.
Group founder Sanjeev Gupta sent a letter to Westminster last week asking for help to pay the day-to-day operating expenses and absorb recent losses.
GFG Alliance, owners of Liberty Steel, employs 35,000 around the world, with 5,000 staff across its 12 UK sites; which include Motherwell and Clydebank.
The company fell into financial difficulties after its main financial backer, Greensill Capital, filed for insolvency earlier this month.
It is understood that the emergency loan was rejected by ministers due to concerns about money leaving the UK to fund operations in other countries.
The Guardian also reported that £42m would have been used to cover a house that was bought by Gupta in August 2020.
Government ministers are however considering various options to protect jobs should the group also become insolvent.
GFG Alliance is also behind energy and natural resources business Simec and Alvance, the latter of which operates an aluminium smelter in Fort William.
A UK Government spokesperson said: “The government is closely monitoring developments around Liberty Steel and continues to engage closely with the company, the broader UK steel industry and trade unions.
“The government has supported the steel sector extensively, including providing over £500m in recent years to help with the costs of energy.”
GFG Alliance declined to comment on the issue regarding the government bail out but provided a statement regarding the general business.
A GFG Alliance spokesman said: “GFG Alliance as a whole is operationally strong and we are benefiting from strong markets in steel, aluminium and iron ore. While Greensill’s difficulties have created a challenging situation, we have adequate funding for our current needs. Discussions to secure alternative long-term funding continue to make good progress and while this takes place we have asked all of our businesses to manage cash carefully. Combined with the efficiency drive we’ve implemented over the past year this has ensured that most of our major businesses generating positive cashflows.
“In the UK speciality steel business, where weakness in the aerospace market has cut demand for some products by 60%, we have been taking specific actions to stabilise the business and improve cash flow. Activities on the sites include reducing steel stocks, matching stock to customer orders, and working with customers to achieve terms that will bring in cash as early as possible. We are grateful for customers and suppliers support in this work which comes alongside our aim to secure additional working capital facilities to support the business and our use of the furlough scheme to support employees. We will continue to work closely with the unions and our employees to identify the most effective ways of supporting the business and preserving jobs.”
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