Get a loan after getting a loan?

Discussion in 'General Business Forum' started by Mr D, May 14, 2019.

  1. Mr D

    Mr D UKBF Legend Free Member

    13,751 1,507
    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'
    • 1 hour ago
    • 106 comments

    [​IMG] 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.

    [​IMG] 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.
     
    Posted: May 14, 2019 By: Mr D Member since: Feb 12, 2017
    #1
  2. Mark T Jones

    Mark T Jones UKBF Ace Full Member

    2,949 828
    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
     
    Posted: May 15, 2019 By: Mark T Jones Member since: Nov 4, 2015
    #2
  3. SteLacca

    SteLacca UKBF Ace Free Member

    1,284 255
    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.
     
    Posted: May 15, 2019 By: SteLacca Member since: Jun 16, 2016
    #3
  4. NickGrogan

    NickGrogan UKBF Ace Free Member

    1,765 382
    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
     
    Posted: May 15, 2019 By: NickGrogan Member since: Nov 15, 2012
    #4
  5. estwig

    estwig UKBF Legend Full Member

    12,126 4,217
    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!
     
    Posted: May 15, 2019 By: estwig Member since: Sep 29, 2006
    #5
  6. The Byre

    The Byre UKBF Ace Free Member

    8,347 3,234
    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!
     
    Posted: May 15, 2019 By: The Byre Member since: Aug 13, 2013
    #6
  7. Noah

    Noah UKBF Ace Free Member

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    Perish the thought! An upstanding private investment co. cynically exploiting the public purse? Shurely not!
     
    Posted: May 15, 2019 By: Noah Member since: Sep 1, 2009
    #7
  8. Noah

    Noah UKBF Ace Free Member

    1,096 272
    Wise words. The various credit card and usurious loan companies will have you on their hit list for this.
     
    Posted: May 15, 2019 By: Noah Member since: Sep 1, 2009
    #8
  9. Mr D

    Mr D UKBF Legend Free Member

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    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.
     
    Posted: May 15, 2019 By: Mr D Member since: Feb 12, 2017
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  10. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    10,189 2,058
    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
     
    Posted: May 15, 2019 By: Chris Ashdown Member since: Dec 7, 2003
    #10
  11. bodgitt&scarperLTD

    bodgitt&scarperLTD UKBF Contributor Free Member

    99 28
    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?
     
    Posted: May 15, 2019 By: bodgitt&scarperLTD Member since: Nov 26, 2018
    #11
  12. Mr D

    Mr D UKBF Legend Free Member

    13,751 1,507

    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.
     
    Posted: May 15, 2019 By: Mr D Member since: Feb 12, 2017
    #12
  13. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    3,851 1,225
    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
     
    Posted: May 15, 2019 By: JEREMY HAWKE Member since: Mar 4, 2008
    #13
  14. Mr D

    Mr D UKBF Legend Free Member

    13,751 1,507
    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?
     
    Posted: May 15, 2019 By: Mr D Member since: Feb 12, 2017
    #14
  15. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

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    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 .
     
    Posted: May 15, 2019 By: JEREMY HAWKE Member since: Mar 4, 2008
    #15
  16. Mr D

    Mr D UKBF Legend Free Member

    13,751 1,507
    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?
     
    Posted: May 15, 2019 By: Mr D Member since: Feb 12, 2017
    #16
  17. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    3,851 1,225
    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
     
    Posted: May 16, 2019 By: JEREMY HAWKE Member since: Mar 4, 2008
    #17
  18. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    10,189 2,058
    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.
     
    Posted: May 16, 2019 By: Chris Ashdown Member since: Dec 7, 2003
    #18
  19. Mr D

    Mr D UKBF Legend Free Member

    13,751 1,507
    So how much should be spent to save a few thousand jobs?
     
    Posted: May 16, 2019 By: Mr D Member since: Feb 12, 2017
    #19
  20. Stedurham

    Stedurham UKBF Regular Free Member

    311 41
    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
     
    Posted: May 16, 2019 By: Stedurham Member since: May 11, 2018
    #20