U.K. Says Bailout of Gupta’s GFG Would Be ‘Very Irresponsible’
(Bloomberg) -- It would be “very irresponsible” if the U.K government bailed out Sanjeev Gupta’s GFG Alliance because of its “opaque” finances and structure, Business Secretary Kwasi Kwarteng said on Tuesday.
Kwarteng last month rejected a request from GFG for a 170 million-pound ($234 million) bailout as it struggles to stay afloat following the collapse of its biggest lender.
“What we can’t do is simply give taxpayers money to companies which are very very opaque with assets all over the world and with liabilities that nobody seems to have got to the bottom of,” Kwarteng told a parliamentary committee on Tuesday. “That would be very irresponsible.”
At stake are more than 5,000 U.K. jobs within GFG, including some 3,000 at Liberty Steel, which has a dozen steel plants dotted around the country. The business secretary said “it’s absolutely necessary” to maintain steel production in the U.K. and that he will support the industry.
Kwarteng declined to be drawn on whether a bailout would be granted if it came specifically from Liberty. Yet he made the point that the main reason for declining the request was that it came from GFG and there weren’t sufficient guarantees the money would stay in the country.
The decision was based, he said, “a technical question in terms of corporate governance.” That suggests that financial help could be made available if Liberty made its own request.
“It’s incumbent on ministers and officials to be sure, to have some degree of surety that that money will stay in the U.K., and won’t simply be dispersed across the Gupta family group’s other steel manufacturing assets across the world,” Kwarteng said. “As far as I could understand we didn’t have those guarantees, it was a very opaque, structure, and there was a reluctance to give the group the money now.”
Kwarteng was also asked about ways he could help the domestic steel industry. Asked about the high electricity prices faced by steelmakers, he said “I hope that we can make some progress on.”
“I have decided in my own mind that we need a steel industry,” Kwarteng said, noting that it should be “decarbonized,” with production using electric arc furnaces providing a route to that.
“The clue’s in the name: electric arc furnace,” he said. “The cost of that is the cost of electricity and we need to think of ways that we can reduce those costs.”
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