A storm is brewing for the Royal Navy's shipbuilding plans, and it all boils down to a cash crunch at a Scottish steel mill. The fate of three warships hangs in the balance, and the situation is more complex than it seems. Let's dive in.
Liberty Steel Dalzell, the Scottish mill tasked with supplying steel for these warships, is facing a major hurdle: a severe cash shortage. Despite securing a contract to provide 34,000 tonnes of metal plates for the Royal Navy's fleet solid support (FSS) ships, production is stalled. Sources indicate the mill lacks the necessary funds to purchase the raw materials, or 'slabs', needed to kickstart operations.
But here's where it gets controversial... Sir David Murray, a prominent figure in the Scottish metals industry, believes the UK government should intervene, similar to how it has supported other steelworks. He's even expressed a willingness to take over the plant's management.
The financial woes at Liberty Steel are symptomatic of the broader struggles faced by companies owned by Sanjeev Gupta, a metals tycoon under significant pressure. Gupta's GFG Alliance empire has been unraveling since the collapse of his primary lender, Greensill Capital, in 2021. This has led to Gupta losing control of several key assets, including Speciality Steel UK in South Yorkshire, which was deemed 'hopelessly insolvent' in August.
The Dalzell mill's financial situation is further complicated by its failure to file accounts for the past five years, and Gupta is facing legal challenges related to this and a fraud investigation.
The FSS ships, designed to carry essential supplies for the Royal Navy's Royal Fleet Auxiliary, are being built in Belfast by the Spanish state-owned shipbuilder Navantia. The first ship, RFA Resurgent, is expected to be delivered in 2031. These orders were intended to bolster UK employment and prioritize UK suppliers. Navantia took over the Harland & Wolff site in Belfast after its British owner went bankrupt last year.
The cash shortage at Liberty Steel has left it unable to buy the steel slabs it needs from British Steel, despite continuing to pay workers 80% of their salaries. Small trial runs in November produced only about 1,000 tonnes of steel – roughly equivalent to three days of output. While Liberty hopes to restart production soon, some industry experts are skeptical of their plans.
Murray, who once owned the Rangers football club, believes he could make the plant profitable within two years with a £50 million investment to cover raw materials and working capital. He previously attempted to acquire the plant in 2015 before it was sold to Gupta. The Scottish government's decision to back Gupta included a £7 million loan, partly based on his promises to revitalize the Alvance aluminum smelter and open an aluminum car wheel factory.
However, the Alvance smelter has been loss-making, and the wheel factory was never built. The £7 million loan remains outstanding.
Murray stated that it's a 'terrible error of judgment' to remain idle when the UK should be capable of producing the steel needed for naval contracts.
Liberty Steel had approached Murray two years ago to sell the Dalzell plant. However, he declined, believing it should be sold via a 'pre-pack administration'.
A restart at Dalzell would be a welcome boost for British Steel's Scunthorpe plant, which supplies the steel slabs. The UK government took control of the plant from its Chinese owners in April and has already spent £274 million to support the loss-making operation.
A Liberty Steel spokesperson claims the plant is 'fulfilling' the Navantia order and expects trial production runs to resume shortly.
The spokesperson added that Liberty aims to attract more business, and recent UK trade actions and tariffs will enable Dalzell to increase production and support UK industrial policy and jobs.
Navantia UK declined to comment.
What do you think? Do you believe the government should intervene? Could Murray's plan work? Share your thoughts in the comments below!
