British Steel’s Scunthorpe plant in north Lincolnshire, northeast England. Picture: AFP/LINDSEY PARNABY
British Steel’s Scunthorpe plant in north Lincolnshire, northeast England. Picture: AFP/LINDSEY PARNABY

London — British Steel, the UK’s second-largest steel producer, is on the brink of collapse unless the government agrees to provide an emergency £30m loan by later on Tuesday, a source close to the situation said.

The steelmaker, owned by investment firm Greybull Capital, employs about 5,000 people, mostly in Scunthorpe, in the north of England, while 20,000 more depend on in its supply chain.

Greybull, which specialises in turning around distressed businesses, paid former owners Tata Steel a nominal £1 in 2016 for the loss-making company, which they renamed British Steel.

British Steel had asked the British government for a £75m loan but has since reduced its demand to £30m after Greybull agreed to put up more money, according to the source close to the negotiations.

If the loan is not approved by Tuesday afternoon, administrators EY could be appointed for British Steel as early as Wednesday, the source said.

"The UK steel industry is critical to our manufacturing base and is strategically important to UK industry. The government must intervene," said Gill Furniss, Labour's spokesperson for steel.

"Administration would be devastating for the thousands of workers and their families who rely on this key industry in a part of the country which has not had enough support and investment from government over decades," Labour said.

If British Steel goes under, it would mark the demise of one of the key parts of what was once a national champion of the British economy.

Unions demanded the government give the loan.

"They must now put their money where their mouth is," said Ross Murdoch, national officer for the GMB union for steelworkers.

"GMB calls on the government and Greybull to redouble efforts to save this proud steelworks and the highly skilled jobs," Murdoch said.

A spokesperson for Britain's business ministry declined to comment on the details of British Steel but said: "We are in regular conversation with a wide range of companies."

British Steel secured a government loan of about £120m in May to enable it to comply with the EU's emissions trading system rules.