Get a loan after getting a loan?

[Mr D]

British Steel just had a loan. Now they want another one. Good business practice or desperation?
How much should be spent to keep a few thousand jobs?

Anyone else fancy a loan from the government?

https://www.bbc.co.uk/news/business-48267688

British Steel seeks government loan for 'Brexit issues'

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Image copyright British Steel
Image caption British Steel's Scunthorpe plant
British Steel has said it is seeking further financial support from the government to help it address "Brexit-related issues".

It follows reports the company needs a loan of up to £75m to keep trading in the coming months.

The UK's second largest steel firm employs 4,500 people, and about 20,000‎ indirectly via its supply chain.

The company said "uncertainties around Brexit are posing challenges for all businesses including British Steel".

It added: "We are holding constructive discussions with our stakeholders on how to navigate them.

"Discussions are continuing about a package of additional support to assist the company address broader Brexit-related issues, whilst continuing with [the company's] investment plans."

A spokesperson for the the Department for Business, Energy and Industry Strategy said: "As this is speculation, we won't be commenting."

British Steel's main plant is at Scunthorpe, but it also has sites in Teesside, Cumbria and North Yorkshire.

Image copyright Getty Images
The move comes just two weeks after British Steel secured a £100m loan from the government to pay its EU carbon bill.

The money meant the private equity-owned firm could avoid a steep EU fine.

According to Sky News, in recent days the steel maker has met its lenders and the government to finalise another loan.

The firm has reportedly faced a slump in orders from European customers ‎due to uncertainty over the Brexit process.

It has also been struggling with the prolonged weakness of sterling since the EU referendum in June 2016 and the escalating trade US-China trade war.

Quoting people close to the process, Sky said insolvency experts have been placed on standby in case British Steel cannot secure the funds it needs.

'Time for action'
The GMB union called on the government to guarantee the future of the firm and safeguard thousands of jobs.

"This government has a track record of sitting on its hands while UK manufacturing collapse round its ears," said Ross Murdoch, GMB national officer.

"Now is the time to take action - ministers must come out and guarantee the loan required to safeguard British Steel."

Private equity firm Greybull Capital rescued Tata Steel's long products business - which makes steel for the rail and construction sectors - during the depths of the steel crisis in 2016, saving more than 4,000 jobs.

It paid a nominal £1 fee for the assets, but pledged to plough up to £400m into the business, which it rebranded British Steel.

Workers had to take pay cuts and reductions in their pensions in return, and the company recently returned to profit.

The news comes days after Tata signalled its planned merger with German rival Thyssenkrupp was off, raising fresh doubts about its Port Talbot site.

Tata said its UK business would keep running, but admitted it was facing tough operating conditions in the UK.

 

[Mark T Jones]

In general terms the answer would be that borrowing money is never, on its own, the solution to a problem. It can be a component of a solution or a bridge to the solution, but unless the other parts exist then it is just more debt

This applies to multiple or single loans equally.

There is of course a political angle in this case - it’s entirely possible that Tata could resolve the issues themselves but are playing their hand as a significant employer in deprived areas to coerce money from the government on soft terms

 

[SteveHa]

I have to say, "Brexit related issues" seems a bit of a broad brush. Wonder if I could get government money for the same reason.

 

[NickGrogan]

it’s entirely possible that Tata could resolve the issues themselves

A bit harsh to expect Tata to resolve this, they sold the business in 2016.

I have to say, "Brexit related issues" seems a bit of a broad brush.

It's because of Carbon Credits. They need to cash in allowances to cover their emissions, normally they do this using next years credits, but due to the Brexit delays, new credits have not been issued, and they need to cash in credits, this they no longer have.

Carbon prices are currently at 10-year highs and rising.

Keep a lookout for other large manufacturers having similar issues.

https://www.ft.com/content/832027d4-5fa2-11e9-a27a-fdd51850994c

 

[estwig]

Got a sh*t business badly run?

Blame the Gov for your problems, under the banner of Brexit throw some mud and make Gov feel guilty. Get a 'loan' in the hope of never having to repay it, or Gov taking over the business when you default, whilst this is going on you fiddle something on the side, robbing pensions pots or asset stripping is good.

It's win-win and everyone lives happily ever after!

 

[The Byre]

Random thoughts -

1. If BS pull out of Scunthorpe, it will become a ghost town - and that will cost more than £75m.

2. Scunthorpe becoming a ghost town may be no bad thing. It has been dependant on steel for over 100 years and no other significant industry has been able to get established there.

3. £75m seed money for creative industries or agricultural processing (i.e. food/drink) may be a more worthwhile investment. In the long run, commercially, steel manufacturing in the UK is a dead duck, though some may see a need for strategic reasons. (Though TBH, the gov. will need that £75m just to support the 25,000 that will suddenly be without employment in the steel industry.)

4. The surrounding countryside is quite pretty and relatively affluent, but the closer you get to Scunthorpe, the lower the standards of living become and the more economically depressed the area appears.

5. It is NEVER good for any town or area to be dependent on just one industry or employer.

6. As much as I am against Brexit (not that it will happen!) blaming Brexit sounds bogus to me!

 

[Noah]

it’s entirely possible that Tata could resolve the issues themselves but are playing their hand as a significant employer in deprived areas to coerce money from the government on soft terms

Perish the thought! An upstanding private investment co. cynically exploiting the public purse? Shurely not!

 

[Noah]

In general terms the answer would be that borrowing money is never, on its own, the solution to a problem. It can be a component of a solution or a bridge to the solution, but unless the other parts exist then it is just more debt

Wise words. The various credit card and usurious loan companies will have you on their hit list for this.

 

[Mr D]

Random thoughts -

1. If BS pull out of Scunthorpe, it will become a ghost town - and that will cost more than £75m.

2. Scunthorpe becoming a ghost town may be no bad thing. It has been dependant on steel for over 100 years and no other significant industry has been able to get established there.

3. £75m seed money for creative industries or agricultural processing (i.e. food/drink) may be a more worthwhile investment. In the long run, commercially, steel manufacturing in the UK is a dead duck, though some may see a need for strategic reasons. (Though TBH, the gov. will need that £75m just to support the 25,000 that will suddenly be without employment in the steel industry.)

4. The surrounding countryside is quite pretty and relatively affluent, but the closer you get to Scunthorpe, the lower the standards of living become and the more economically depressed the area appears.

5. It is NEVER good for any town or area to be dependent on just one industry or employer.

6. As much as I am against Brexit (not that it will happen!) blaming Brexit sounds bogus to me!

Trouble is, government chucking money at a problem or a place without a good plan is a disaster.

I used to access government money from time to time in one of my jobs, once accepted to get any money the department responsible chucked money around like it belonged to someone else.
Get a few grand for a project, get asked can you spend another 10 grand by end of march if we give it you, say sure. Then get asked weeks later how much more you can spend by end of march - tell them 20 grand - and get payment a few days later.
Give me an open budget I can find things to spend money on. The initial project only had its initial money each time, the rest 'wasted' on staff salaries, equipment, consultants etc.

The trouble with strategic industries is virtually any production or service industry can claim to be vital to the nation.
Farms? vital. Mines? vital. Leasing? vital. Building maintenance? vital. Computer makers? vital. Taxis? vital.

 

[Chris Ashdown]

I wonder how 3D Printing will effect steel over say the next 1-15 years

Today you can print 3d products in nearly all materials from Titanium, steel, Nylon, Plastics etc, 3D printing offers many advantages over traditional methods of making items and at the same time make stock holding greatly redundant as you can make your own replacement parts with just a copy of the computer file and the printer plus powders/filaments

Some steel parts will still be financially better off stamped out like say car doors etc

Another thought is that China and other countries will have to come in line with clean environments and this will effect their ability to mass produce steel products and this may make producing steel profitably better in other countries

 

[bodgitt&scarperLTD]

I wonder how 3D Printing will effect steel over say the next 1-15 years

It will have not the slightest effect on steel production. It;s effect will be greatest seen in machine shops, and even then I suspect not that much.

3D printing will replace some parts that are curently made by machining down a larger peice of steel into the finished product. It's main benefit is in saving time and easier production of certain pieces, not in the savings in steel, which is cheap. If you start with a 2kg block and machine it down to 250g, this is where there will be savings if you can 3d print instead- but primarily in machine and tooling wear, not the cost of steel.

What British Steel produce is structural steel- hundreds of thousands of tonnes of it. There is no cheaper way to produce things like 12m bars of 152mm I-beam than in the steel mill. And in terms of tonnes required, the demand for structural steel totally and utterly dwarfs the demand for 3d printed widgets. Your average house needs around 3-4 tonnes of steel. How many widgets is that?

 

[Mr D]

It will have not the slightest effect on steel production. It;s effect will be greatest seen in machine shops, and even then I suspect not that much.

3D printing will replace some parts that are curently made by machining down a larger peice of steel into the finished product. It's main benefit is in saving time and easier production of certain pieces, not in the savings in steel, which is cheap. If you start with a 2kg block and machine it down to 250g, this is where there will be savings if you can 3d print instead- but primarily in machine and tooling wear, not the cost of steel.

What British Steel produce is structural steel- hundreds of thousands of tonnes of it. There is no cheaper way to produce things like 12m bars of 152mm I-beam than in the steel mill. And in terms of tonnes required, the demand for structural steel totally and utterly dwarfs the demand for 3d printed widgets. Your average house needs around 3-4 tonnes of steel. How many widgets is that?

So presumably if the company went under the customers would just order the steel from elsewhere.
Maybe costing more, maybe less - though if the company is not able to pay its bills with the income it has you would hope they looked at increasing prices already.

 

[JEREMY HAWKE]

Its a bit like the banks too big to fail
You cant let this industry go it would destroy South Wales Sometimes when things are on a large scale it is not always about profit It is also about avoiding the act of just hanging people out to dry .
If we let it wind itself down what would the effect be on the communities They would be dependant on the state for decades to come .

If your concerned about profit then just worry about yourself
If your concerned about our people then you should support the effort to maintain this industry

 

[Mr D]

Its a bit like the banks too big to fail
You cant let this industry go it would destroy South Wales Sometimes when things are on a large scale it is not always about profit It is also about avoiding the act of just hanging people out to dry .
If we let it wind itself down what would the effect be on the communities They would be dependant on the state for decades to come .

If your concerned about profit then just worry about yourself
If your concerned about our people then you should support the effort to maintain this industry

Not sure South Wales is affected by a plant in Scunthorpe risking being shut.

How much per job should the state pay - and to which companies?

If steelworkers can get say £50k per job to support them, can retail workers? Can call centre agents? Can logistics workers?

 

[JEREMY HAWKE]

I was thinking about Port Talbot as this is also under threat

Its not a question of the sector that people work in It is a question of the economic effect on the area .

 

[Mr D]

I was thinking about Port Talbot as this is also under threat

Its not a question of the sector that people work in It is a question of the economic effect on the area .

So basically any big employer in an area should get government money?
Ford have a plant in the UK. JLR has one in Coventry I believe. Toyota in Derby.
Does Stoke still have potteries? How about British Aerospace?

 

[JEREMY HAWKE]

So basically any big employer in an area should get government money?
Ford have a plant in the UK. JLR has one in Coventry I believe. Toyota in Derby.
Does Stoke still have potteries? How about British Aerospace?

NO NO NO NO NO

The area should get government money via the engine that is driving that local economy
I used to think like you but its no all about Money and profit all the time .

I would happily see the government back a large corporation to save an area than to see that community become a drug invested waste land

If people want to see the area not get any help then we could just say split the country up ! England can just consist of London and the South East and we can pull the ladder up !

Is that the UK that people really want

 

[Chris Ashdown]

Maybe Corby disputes that argument

In 1980, British Steel decided to close the steel works and the effect was devastating on Corby with 6,000 people being made redundant. Massive lobbying of Westminster and Europe
by Councillors and residents ensured that Corby did not die. The decision was made to pull the old works down as quickly as possible to show the commitment to redevelopment. Within
15 months of the closure, 15,000 new jobs were created by 1,500 new businesses occupying 1.5 million square feet of new business units.

 

[Mr D]

NO NO NO NO NO

The area should get government money via the engine that is driving that local economy
I used to think like you but its no all about Money and profit all the time .

I would happily see the government back a large corporation to save an area than to see that community become a drug invested waste land

If people want to see the area not get any help then we could just say split the country up ! England can just consist of London and the South East and we can pull the ladder up !

Is that the UK that people really want

So how much should be spent to save a few thousand jobs?

 

[Stedurham]

How much did government bail out the ******s in London? These are normal hard working people, plant closing in redcar, has caused untold heartache and Redcar will become a total dive

 

[Mr D]

How much did government bail out the ******s in London? These are normal hard working people, plant closing in redcar, has caused untold heartache and Redcar will become a total dive

I don't think the ******s in London got bailed out. A bunch served their time. There was even a film about the Krays.
I know a bunch of people around the country got to keep the money in their own bank accounts when the banks were bailed out. Companies even got to do payroll and buy supplies. Keeping millions in jobs maybe?

And quite profitable for the government, unlike the share purchases.

Most companies going under just went under without government lending them money. Quite a number of retailers in past few years - are retail staff worth less than steelworkers?

 

[JEREMY HAWKE]

The closure of this site would indirectly result in the loss of 20,000 UK jobs
It is not the same as closing your local Debenhams

Clarion was a bad job all in all but all those jobs remained and were managed and taken over by equally hopeless companies. It is not the same

 

[Mr D]

The closure of this site would indirectly result in the loss of 20,000 UK jobs
It is not the same as closing your local Debenhams

Clarion was a bad job all in all but all those jobs remained and were managed and taken over by equally hopeless companies. It is not the same

And the closing of some of the retailers directly result in the loss of how many jobs?

So should government give money to retailers?

https://www.retailgazette.co.uk/blog/2018/12/164100-retail-job-losses-expected-2019-woes-set-worsen/

164,100 retail job losses expected in 2019 as high street woes set to worsen
The losses are predicted to be spread across both larger retailers and independents, with total retail store closures expected to rise from 18,443 this year to 22,100 in 2019.





These closures are forecast to lead to a total of 164,100 job losses, up from 137,719 this year.

 

[JEREMY HAWKE]

Spread over the whole of the UK

 

[The Byre]

I worked at Appleby-Frodingham Steelworks in Scunthorpe back in 49BC. It was doomed then and I am surprised that it is still going today.

They were using pre-war 200-ton mixers and furnaces and emptying into 70-ton buckets which then poured into 20-ton ingot-moulds mounted on a train that then drove to a separate rolling mill. They had one very small electric-arc purifier that took two days to do one ingot, one wire-works that jammed regularly and one small continuous-casting plant.

Senior staff were remote, rude and totally rubbish. The plant director and the works manager were both history graduates from Oxford and the MD of British Steel had his own private plane and the works had to have an air-strip just so that he could land there. But there was no money for investing in the new fully automated systems that Germany, Japan and later South Korea were developing.

Back in the 60s, the place was a mess - and from what I hear, it's a far bigger mess today!

All sorts of new technologies were developed at AF works, including the oxygen lance that revolutionised the way steel was made - but nationalisation and then forced privatisation starved the industry of investment. Making steel is capital-intensive in a way that other industries could hardly even imagine - think BILLIONS!

£100m here and £75m there ain't gonna cut it. It could not even scratch the surface of the problem. £75m won't scratch dandruff out of its hair!

On Thursday, bailiffs were sent in to stick yellow stickers on stock and machinery that had been marked as security for the previous round of loans. £75m against what? The land is mortgaged, the plant and stock are already 'on-hock' and 'up-the-spout' and the buildings are totally worthless.

The reality is, Abblby-Frodingham Steelworks is a zombie business and it always was. Arrogance, pish-poor management and short-sighted political dogma killed it off long ago.

Scunthorpe is a remarkable ugly town, inhabited by remarkably ugly people. Poor, ugly, unhealthy and deformed by generations of breathing in the foul air from the works, they have been beaten down and will submit themselves to whatever ignoble fate awaits them. When the 4,600 employees get their last pay package, a further 20,000 that work in all the feeder businesses around Scunthorpe will, sooner or later, also be marking time in the dole queue.

The knock-on effect will be devastating. There is nothing else there. It is not as if Scunthorpe has got a brewery or a major food manufacturer. The 80,000 population of Scunthorpe will have nowhere to go and nothing to do when they don't get there. House prices in the many villages around Scunthorpe will fall through the floor, along with social cohesion and all hope for the future.

That's the trouble with mistakes. They can take a long time to bite - and those that get bitten are not the ones who made the mistakes. Mistakes made 70 years ago are going to come home to roost today!

But I did enjoy my time working there and I particularly liked the way we were paid. The money was inside what looked like a brown seed packet. On the outside was printed "If contents of this envelope do not comply with your payslip, inform the pay-office BEFORE opening the envelope!"

 

[Mr D]

Spread over the whole of the UK

Rather than just a few sites.

You think that matters to the people affected? Perhaps car companies should get government loans?
How about Admiral insurance - 7,000 between 3 sites in Wales.
Tata steel - 7,000 between 6 sites in Wales.
Airbus - 6,000 in one site in Wales
National express - 4,800 in Birmingham
Mondelez International - 2,500 in Birmingham

At what point should government interfere in business and how much per person should be spent of taxpayers money keeping someone employed?

 

[Borim]

Yes, all those companies.... you just get some manipulated issue, make it cause of Brexit and get tons of money in some other way of doing the job. How it is possible to make it for my own business really ? I simply couldn't get it. I wish I had their problems.

 

[Mr D]

Yes, all those companies.... you just get some manipulated issue, make it cause of Brexit and get tons of money in some other way of doing the job. How it is possible to make it for my own business really ? I simply couldn't get it. I wish I had their problems.

That's where you need to think smart.

To use the Oxfam method, a government grant would keep two disabled people off the streets, it would enable a couple to stay together and keep their house, it would provide food and shelter to a dog and some cats. It would keep NHS costs down.
Multiple benefits and all talking about the same family. If maths can be done wrong even better.

Government speak, you use the terms 'positive outcome' and 'great outputs'.

 

[Noah]

Relevant.

"The turnaround is, however, a success story that almost never was. In the troubled history of Leyland, the early 1990s saw it almost collapse. But help from Lancashire county council for a management buyout kept the truck division going."

 

[Mark T Jones]

But I did enjoy my time working there and I particularly liked the way we were paid. The money was inside what looked like a brown seed packet. On the outside was printed "If contents of this envelope do not comply with your payslip, inform the pay-office BEFORE opening the envelope!"

Unless there was serious incompetence, said envelope would hav3 had a tear-off corner through which notes could be counted

 

[Mr D]

Relevant.

And if the company had failed even with the loan then it would have been an expensive lesson.

More than one local and national government investment has turned out an expensive loss.

 

[emilyhilscher]

Nice Discussion