The crisis in the British steel industry intensified yesterday when one of Britain’s largest privately owned companies slumped into administration, putting 1,700 jobs at risk.
Caparo, an umbrella of 20 separate businesses mostly in the Black Country but also in Wales and the northeast, founded and led by Lord Paul, the prominent Labour donor, is at the heart of the supply chain for carmakers such as Jaguar Land Rover, Nissan and BMW and also the aero engine maker Rolls-Royce.
The news will come as another hammer blow to an industry already reeling from the news that 1,200 workers at Tata Steel employed at Scunthorpe and in plants south of Glasgow are expected to have their redundancy notices confirmed today. Britain’s biggest company in the sector is also working through 750 cuts at its Rotherham speciality steel plant.
That follows the loss of up to 2,000 jobs last week from the closure of the historic Redcar steelworks on Teesside by SSI, its Thai owner.
Employers’ bodies warned of further impending casualties among steel businesses hit by falling prices and high energy costs, while steelworkers’ unions said they feared a domino effect of redundancies and plant closures.
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Matt Hammond, the PwC Midlands partner brought in to lead the Caparo administration, said: “This is a significant business with a wide range of interests across steel, engineering, vehicles products and technologies. Its scale and reach into significant customers and its importance to suppliers cannot be overstated.”
He said that the impact of Chinese competition and high British environmental penalties, which have hobbled the rest of the UK steel industry, were not the sole factors in the collapse of a business that Lord Paul set up in 1968 after he came to Britain from India and which he built through a wave of takeovers in the 1980s and then again in the 2000s.
“The impact of steel prices and exchange rates has had an impact on some parts of the Caparo Industries group,” Mr Hammond said. “However, there are businesses in the group that are not directly affected by steel prices.”
Lord Paul, 84, has been among Britain’s 50 richest people, having accumulated a fortune once valued at more than £2 billion. He was created a Labour peer in the 1990s, has donated £500,000 to the party and was a particularly keen supporter of Gordon Brown, the former prime minister.
Gareth Stace, director of UK Steel, the employers’ group, said: “The events of the last week amount to a flow of blood that has to be dealt with by life-saving surgery not sticking plasters. If nothing is done, there will be further casualties.”
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There were also renewed demands that David Cameron challenge President Xi, who is on a state visit to Britain, over China’s stock-dumping in Europe. Roy Rickhuss, the general secretary of Community, the steelworkers’ union, called for the government to act and for steel bosses to “hold their nerve” during the crisis.
Tony Burke, of the Unite union, warned: “[Government] failure to act urgently could lead to a domino effect taking hold across the industry, leading to the loss of yet more skilled jobs as firms buckle.
“Ministers need to ask themselves ‘how many more steel firms need to go to the wall’ before they step in and support the UK’s steel industry?”