China’s Jingye Group (SHA: 600768) announced that it plans on investing £1.2bn in British Steel in order to prevent the collapse of British Steel.
British Steel
British Steel is the second biggest steel producer in the United Kingdom.
The company collapsed into liquidation earlier this year in May after the government’s refusal to provide a financial bailout.
Since the collapse of British Steel, the company has been searching for ways to save jobs.
British Steel employs more than 24,000 employees in the United Kingdom.
Jingye Group contacted the United Kingdom government to request approval for taking over British Steel.
Jingye Group, an industrial giant based in China, believes British Steel has a sustainable future and growth potential.
Government Approval
Jingye Group expects to finalise the sale after receiving regulatory approval.
Furthermore, both Jingye Group and British Steel hope to complete the deal as soon as possible in order to start the transition period.
British Steel will continue its normal operations during the transition period.
Jingye Group’s decision to take over British Steel will save thousands of jobs as well as maintain previous production levels of steel in the United Kingdom.
Nevertheless, government approval is likely to take time.
Due to the strategic importance of steel production, the United Kingdom government is likely to take time scrutinising the deal before announcing its final decision.
General Election
The upcoming general election is critical to the future of the deal.
Jingye Group needs government approval as well as regulatory approval in order to complete the take over.
The timeframe and success of the takeover will depend on the actions of the administration elected following the general election.
The deal is fundamental to United Kingdom’s economy. If British Steel is not saved, efficiency levels are likely to decrease due to distortions in multiple sectors related to steel production and supply.
The loss of British Steel would lead to negative distortions in the manufacturing, construction and infrastructure sectors.