Caparo Industries, part of the business empire of the Labour peer Lord Paul, is considering options including appointing administrators in the latest blow to Britain’s steel industry.
The steel products company, based in the West Midlands town of Oldbury, is likely to appoint PwC as its administrator on Monday. The strength of sterling against the euro and poor trading in the steel industry are understood to be the main causes of its problems, the Daily Telegraph reported.
Management was understood to be informing Caparo’s 1,800 workers across 21 sites in England and Wales on Monday morning that the company was in difficulty. All employees are said to have been told to report for work at the company, whose products include steel tubes and fastenings for the aerospace, automotive and other industries.
Britain’s steel industry is under pressure from cheap Chinese imports, high energy prices, slowing demand and the strength of the pound. The government held a summit in Rotherham on Friday to discuss the industry’s future after the closure of the SSI plant in Redcar with the loss of 2,200 jobs.
In a further sign of the strain on the sector, Tata Steel is cutting up to 1,200 jobs in Scunthorpe and at two plants in Scotland. Tata had already cut production at its sites in Newport, Port Talbot and Rotherham with the loss of about 1,000 jobs.
The crisis in the steel sector threatens to cloud the state visit to the UK of Xi Jinping, the Chinese president. UK Steel, the industry’s trade group, has questioned how strongly the chancellor expressed concern about the dumping of cheap steel on his recent trade trip to China.
Swraj Paul founded Caparo in 1968 after he moved to Britain from India and the business became the source of his fortune, estimated at £2bn.
Paul’s business spans the UK, Europe, India and the US. Caparo Industries Plc is Caparo’s UK arm and is run by a separate management team though Paul, who became a peer in 1996, is a big shareholder.
No one from Caparo was available to comment. PwC declined to comment.
Angela Eagle, Labour shadow business secretary said: “This is a further blow to the steel industry which is now on its knees, and my thoughts are with the employees of Caparo who are facing uncertainty over their future.
“The industry needs urgent action from the government, however this government seems content to let the industry fail.
“Rather than setting up more talking shops, the government should be taking action to tackle higher energy prices, they should be providing export and procurement support and be looking at what temporary measures could help the industry, including looking again at business rates.
“With the Chinese president in the UK this week, I hope the government will raise the issue of anti-competitive dumping which is driving down steel prices.”
Roy Rickhuss, general secretary of steelworkers’ union Community, said: “This news is a tragic reminder of the urgent need for government action to help our steel industry survive. Crippling energy costs and the dumping of cheap Chinese steel is threatening the very future of the UK’s steel sector.
“We will be working to support our members within Caparo at this difficult time and are seeking an urgent meeting with the company.
“This is an industry-wide crisis. It is vitally important that Britain’s steel companies hold their nerve and that government works with unions and the industry to build a sustainable future for UK manufacturing with steel at its heart.”
This article was written by Sean Farrell, for theguardian.com on Monday 19th October 2015 16.06 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010