Troubled Sheffield Forgemasters nationalised in £2.6m deal to save crucial defence supplier from collapse
Troubled steelmaker Sheffield Forgemasters has been nationalised in a £2.6m deal to save the crucial defence supplier from collapse.
The state has taken control of the company, which makes vital components for the Royal Navy’s Trident fleet of nuclear submarines and some of Britain’s biggest manufacturers.
It has also been involved in the design of a new type of nuclear power station, called a Small Modular Reactor (SMR).
Stepping in: The Government’s rare intervention to take over a private business will safeguard almost 700 jobs
The Government’s rare intervention to take over a private business will safeguard almost 700 jobs.
The Ministry of Defence plans to plough £400m into upgrading the company’s machinery and plants over the next ten years. David Bond, Sheffield Forgemasters’ chief executive, said there was no way current shareholders would be ‘able to fund an investment of this size’.
He added that the sale ‘provides a more secure future’.
Sheffield Forgemasters traces its history back to a blacksmith forge in the 1750s. It has been plagued by financial struggles for several years. In 2016 major defence firms BAE Systems, Babcock International and Rolls-Royce underwrote a £30m loan for the group. This followed an approach in 2015 from a state-owner Chinese firm about a rescue deal, which was blocked by ministers.
Talks about the Ministry of Defence’s rescue had been going on for more than six months. As well as being a crucial defence supplier, the Government has been keen to ensure it survives because of its role in the SMR programme.
Ministers have given early backing to the project, led by Rolls-Royce, and are expected to give the go-ahead to building several plants.
The need for these sites has become more urgent as ministers are said to want to block China from any involvement in new large-scale nuclear plants. The Government said Sheffield Forgemasters was ‘the only available manufacturer with the skills and capability’ to produce castings and forging from specialist steels to ‘the highest standards required for these programmes’.
However, officials added that other steel companies would still be able to bid for Government contracts. Sheffield Forgemasters’ problems mirror those of the wider UK steel industry, which has seen companies such as Tata Steel review whether to keep their plants. British Steel went bust after the ministers refused to lend it more money.
Liberty Steel – which employs 3,000 in Britain – is also fighting for survival after Greensill Capital, the largest lender to its owner Sanjeev Gupta, went bust.
Roy Rickhuss, general secretary of the Community union, said: ‘We see this move as a recognition of the importance of the steel industry to our country’s economic future.’
Henri Murison, director of the Northern Powerhouse Partnership, said the announcement was ‘a significant act to safeguard one of our most important manufacturing and infrastructure assets – not just in the North but in the whole of the UK’.