The Chinese owner of British Steel has enlisted a prominent City law firm to investigate the recovery of hundreds of millions of pounds it invested in the Scunthorpe-based company before the government took control of its operations in April. Sky News has learned that Jingye Group has engaged Linklaters, the firm that advised it on the acquisition of British Steel in 2020, to assess legal options for recovering a portion of its investment.
It remains unclear which specific avenues Jingye is exploring with Linklaters, or whether a formal legal challenge against the government is being considered. British Steel’s balance sheet shows debts totaling nearly £1 billion, with the majority believed to be owed to Jingye in the form of inter-company loans.
According to the Financial Times, government officials have been contemplating the use of new legislation to eliminate these debts, thereby facilitating the sale of the business. The government and Jingye have been in disagreement for weeks regarding the future of the blast furnaces at the Scunthorpe plant.
Following the intervention of Jonathan Reynolds, the business secretary, to assume control of the UK’s second-largest steel producer, the government has secured additional raw materials to ensure the continued operation of the furnaces. Jingye had been on the verge of closing the furnaces, which would have resulted in the loss of thousands of jobs, after requesting £1 billion in state aid to support the transition to environmentally friendly steel production.
Mr. Reynolds has stated that Jingye’s shares in British Steel, which has not yet been formally nationalized, hold no value, and the government has no intention of purchasing them. A spokesperson for Jingye confirmed the appointment of Linklaters, emphasizing that they were the original advisors on the 2020 acquisition.
A representative from the Department for Business and Trade mentioned that swift action was taken to ensure the continued operation of the blast furnaces, recognizing that the long-term sustainability of British Steel requires private sector investment. The government is collaborating closely with Jingye and various third parties to explore future options and determine the most sustainable path forward for the site.
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