Recommendations & Conclusions
42 items
1
Conclusion
Fourth Report - Liberty Steel and the f…
The corporate structure and governance of GFG Alliance companies resulted in no formal oversight or accountability of the decisions taken by Sanjeev Gupta. Mr Gupta put members of his staff in an unacceptable position by employing them with job titles associated with traditional executive functions in well run companies, without …
Government response. 3. Complex corporate structures exist for a variety of reasons, and the government does not wish to restrict the ability of businesses to structure themselves appropriately. However, the government agrees that those structures should not be a legal barrier to …
Department for Business and Trade
2
Recommendation
Fourth Report - Liberty Steel and the f…
We recommend that Ministers reflect on the systemic risks to UK industry posed by such unusual corporate structures and, if deemed necessary, bring forward amendments to the Companies Act. (Paragraph 29) Audit
Government response. 3. Complex corporate structures exist for a variety of reasons, and the government does not wish to restrict the ability of businesses to structure themselves appropriately. However, the government agrees that those structures should not be a legal barrier to …
Department for Business and Trade
3
Conclusion
Fourth Report - Liberty Steel and the f…
We were not reassured by the evidence presented by King & King and note the legal restrictions placed upon Mr Patel, and other auditors who had previously audited GFG Alliance companies, by Sanjeev Gupta.
Government response. 3. Complex corporate structures exist for a variety of reasons, and the government does not wish to restrict the ability of businesses to structure themselves appropriately. However, the government agrees that those structures should not be a legal barrier to …
Department for Business and Trade
4
Conclusion
Fourth Report - Liberty Steel and the f…
Despite public statements over a number of years to the contrary, we see, as yet, no tangible evidence that Sanjeev Gupta and GFG Alliance companies are making improvements to corporate governance or improving transparency through the publication of consolidated accounts.
Government response. 10. BEIS agrees that the issues raised by the Committee are of public interest and merit investigation. As the Committee’s report states, the Financial Reporting Council (FRC) is the relevant public body. As they operate independently from Government, BEIS commends …
Department for Business and Trade
5
Conclusion
Fourth Report - Liberty Steel and the f…
We found it utterly unconvincing, and do not believe that King & King had the capacity, expertise, or resources to audit the accounts of multiple large GFG Alliance and Liberty Steel UK companies representing over £2.5 billion of revenue.
Government response. Liberty Steel and the Future of the UK Steel Industry: Government response 5
Department for Business and Trade
6
Conclusion
Fourth Report - Liberty Steel and the f…
The reputation of Liberty Steel UK has been threatened by the poor audit and accounting practices of GFG Alliance, including the changing of accounting deadlines and its inability to produce consolidated accounts. As these accounts are yet to be published it is difficult to see the true financial picture of …
Government response. Liberty Steel and the Future of the UK Steel Industry: Government response 5
Department for Business and Trade
7
Recommendation
Fourth Report - Liberty Steel and the f…
We recommend that the Financial Reporting Council, as the competent authority for audit in the UK, refer this case to the relevant Recognised Supervisory Body, the Institute of Chartered Accountants for England and Wales, to investigate King & King under the Audit Enforcement Procedure as a matter of urgent public …
Government response. Liberty Steel and the Future of the UK Steel Industry: Government response 5
Department for Business and Trade
8
Conclusion
Fourth Report - Liberty Steel and the f…
We commend the Government’s decision to reject GFG Alliance’s request for £170 million of financial support in March 2021. The Secretary of State was correct to be cautious about providing a large grant to a group of companies with a centralised, complex and opaque governance structure.
Government response. Liberty Steel and the Future of the UK Steel Industry: Government response 5
Department for Business and Trade
9
Recommendation
Fourth Report - Liberty Steel and the f…
In light of the Greensill Capital collapse and subsequent financial hardship of GFG Alliance and Liberty Steel UK, we urge the Government to give consideration to formalising the fit and proper person test for private company directors within any future steel sector deal.
Government response. 10. BEIS agrees that the issues raised by the Committee are of public interest and merit investigation. As the Committee’s report states, the Financial Reporting Council (FRC) is the relevant public body. As they operate independently from Government, BEIS commends …
Department for Business and Trade
10
Conclusion
Fourth Report - Liberty Steel and the f…
We note the recent developments within GFG Alliance and Liberty Steel UK and welcome the injection of capital at Liberty Steel’s Rotherham plant. However, we note that once again Sanjeev Gupta has decided to set up an additional corporate entity to provide financial support to Liberty Steel UK companies without …
Government response. 10. BEIS agrees that the issues raised by the Committee are of public interest and merit investigation. As the Committee’s report states, the Financial Reporting Council (FRC) is the relevant public body. As they operate independently from Government, BEIS commends …
Department for Business and Trade
11
Conclusion
Fourth Report - Liberty Steel and the f…
We would welcome the Insolvency Service considering whether, on the basis of the evidence we have received, Sanjeev Gupta may have acted in breach of his fiduciary duties as a company director in the United Kingdom.
Government response. 6 Liberty Steel and the Future of the UK Steel Industry: Government response
Department for Business and Trade
12
Conclusion
Fourth Report - Liberty Steel and the f…
More broadly, we believe that until Mr Gupta restructures his GFG Alliance companies into a more acceptable corporate structure and publishes consolidated accounts that are adequately audited, that he fails to fulfil the criteria that we believe should be applied to define a fit and proper person for the purposes …
Government response. 6 Liberty Steel and the Future of the UK Steel Industry: Government response
Department for Business and Trade
13
Conclusion
Fourth Report - Liberty Steel and the f…
The way in which future, or prospective, receivables operated between GFG Alliance and Greensill Capital is disputed by both parties. We note that several claims have been made about the use of future receivables and their relation to “suspect invoices” and welcome the Serious Fraud Office’s investigation into this matter.
Government response. 16. The Government is grateful to the Committee for its agreement that providing the grant requested to support GFG Alliance would have been an inappropriate use of taxpayer money.
Department for Business and Trade
14
Conclusion
Fourth Report - Liberty Steel and the f…
Steel is a foundational industry in the UK and in need of significant structural reform. The use of high-risk financial funding practices, such as future receivables lending, that Greensill Capital and GFG Alliance engaged in are barriers to such reforms. By his use of such practices Mr Gupta, the so-called …
Government response. 16. The Government is grateful to the Committee for its agreement that providing the grant requested to support GFG Alliance would have been an inappropriate use of taxpayer money.
Department for Business and Trade
15
Recommendation
Fourth Report - Liberty Steel and the f…
We recommend that the Financial Conduct Authority and HM Treasury investigate the use of, and accounting rules for, future or prospective receivables.
Government response. 16. The Government is grateful to the Committee for its agreement that providing the grant requested to support GFG Alliance would have been an inappropriate use of taxpayer money.
Department for Business and Trade
16
Conclusion
Fourth Report - Liberty Steel and the f…
GFG Alliance’s reported engagement in circular trading, or REPO structures, exacerbated a concentration risk to Greensill Capital by raising large amounts of working capital against invoices created to raise finance instead of selling steel to genuine customers. (Paragraph 86) 64 Liberty Steel and the Future of the UK Steel Industry
Government response. 16. The Government is grateful to the Committee for its agreement that providing the grant requested to support GFG Alliance would have been an inappropriate use of taxpayer money.
Department for Business and Trade
17
Conclusion
Fourth Report - Liberty Steel and the f…
We did not receive evidence that the use of circular trading between companies is a systemic issue, but note the potential criminal liability associated with the worst examples of financial engineering between businesses. Despite repeated reassurances from GFG Alliance, we remain unconvinced by Sanjeev Gupta’s attempts to re- structure and …
Government response. 25. The International Accounting Standards Board (IASB) has an active project on its agenda in respect of supply chain finance (reverse factoring) arrangements. On 26 November 2021, the IASB issued an Exposure Draft which proposed amendments to IAS: 7 Statement …
Department for Business and Trade
18
Conclusion
Fourth Report - Liberty Steel and the f…
We note that concerns were raised by HM Treasury and shared with BEIS about GFG Alliance and Wyelands Bank during the accreditation process of Greensill Capital to the CLBIL scheme.
Government response. 33. We welcome the Committee’s acknowledgment that BEIS acted properly in this matter, and that the British Business Bank rightly operated independently and made decisions in accordance with its own procedures and practices.
Department for Business and Trade
19
Conclusion
Fourth Report - Liberty Steel and the f…
We recognise that the subsequent level of interest from the BEIS Department about the accreditation of Greensill Capital was “unusual” but we are confident that this did not impact the approval process and the British Business Bank’s decision remained independent. Given the potential impact of the financial position of Greensill …
Government response. 33. We welcome the Committee’s acknowledgment that BEIS acted properly in this matter, and that the British Business Bank rightly operated independently and made decisions in accordance with its own procedures and practices.
Department for Business and Trade
20
Conclusion
Fourth Report - Liberty Steel and the f…
However, the collapse of Greensill Capital and its impact on Liberty Steel UK highlights the fragility of the sector in the UK more generally and raises far reaching and fundamental questions for the Government to consider in terms of how it should work with the industry to secure a sustainable, …
Government response. Liberty Steel and the Future of the UK Steel Industry: Government response 7
Department for Business and Trade
21
Conclusion
Fourth Report - Liberty Steel and the f…
High electricity prices are hindering the ability of UK steel producers to compete on the international market and are a deterrent to inward investment. If the Government is serious about decarbonising the steel industry, it must first recognise the severity of the challenge energy prices pose to steel companies in …
Government response. Liberty Steel and the Future of the UK Steel Industry: Government response 7
Department for Business and Trade
22
Recommendation
Fourth Report - Liberty Steel and the f…
UK steel producers were already facing some of the highest electricity prices in Europe prior to recent rises in the wholesale price of gas. Soaring gas prices have since transformed what was a long-standing problem into an immediate crisis. We urge the Government to support UK steel producers but note …
Government response. 25. The International Accounting Standards Board (IASB) has an active project on its agenda in respect of supply chain finance (reverse factoring) arrangements. On 26 November 2021, the IASB issued an Exposure Draft which proposed amendments to IAS: 7 Statement …
Department for Business and Trade
23
Conclusion
Fourth Report - Liberty Steel and the f…
We recognise that decisions on how and whether to compensate industry for the costs of electricity will, by necessity, have implications for consumers and other network users. However, it is clear that current electricity costs for UK steel Liberty Steel and the Future of the UK Steel Industry 65 producers …
Government response. 25. The International Accounting Standards Board (IASB) has an active project on its agenda in respect of supply chain finance (reverse factoring) arrangements. On 26 November 2021, the IASB issued an Exposure Draft which proposed amendments to IAS: 7 Statement …
Department for Business and Trade
24
Recommendation
Fourth Report - Liberty Steel and the f…
If additional support is not forthcoming, high electricity prices will continue to have a pernicious effect on the UK steel industry, resulting in long-term decline and future crises. The Government should set out, following a consultation with industry, what support it will offer beyond the current compensation scheme to reduce …
Government response. 25. The International Accounting Standards Board (IASB) has an active project on its agenda in respect of supply chain finance (reverse factoring) arrangements. On 26 November 2021, the IASB issued an Exposure Draft which proposed amendments to IAS: 7 Statement …
Department for Business and Trade
25
Conclusion
Fourth Report - Liberty Steel and the f…
When implemented, the Targeted Charging Review has the potential to burden UK steel producers with costs exceeding relief provided to the sector as an energy intensive industry. We note that despite this decision having a potentially significant impact on UK steel producers it has been left entirely to Ofgem without …
Government response. 25. The International Accounting Standards Board (IASB) has an active project on its agenda in respect of supply chain finance (reverse factoring) arrangements. On 26 November 2021, the IASB issued an Exposure Draft which proposed amendments to IAS: 7 Statement …
Department for Business and Trade
26
Recommendation
Fourth Report - Liberty Steel and the f…
Given that UK steel producers are already facing some of the highest electricity prices in Europe and that demand for electricity will only increase as the sector decarbonises, the Government should exempt the steel sector from increased costs arising from Targeted Charging Review reforms. (Paragraph 132) Public Procurement
Government response. 43. We recognise this is a worrying time for businesses facing pressures due to the significant increases in global gas prices, and the subsequent increases in electricity prices. Extensive engagement with industry continues across Government at both a ministerial and …
Department for Business and Trade
27
Conclusion
Fourth Report - Liberty Steel and the f…
Despite advances made since the publication of the Procurement Policy Note in 2015, UK steel producers are still encountering challenges when competing for and securing public contracts. Much of this is due to an opaque and informal approach taken to steel procurement by contracting authorities and action is needed from …
Government response. 57. Since leaving the EU the Government has initiated a review of our public procurement rules with the aim of speeding up and simplifying our processes, placing value for money at their heart, and unleashing opportunities for innovation. In September …
Department for Business and Trade
28
Recommendation
Fourth Report - Liberty Steel and the f…
To ensure full transparency, the Procurement Policy Note (PPN) on steel procurement in major projects should be updated to include a requirement for contracting authorities to provide supply chain plans and publicise supply opportunities for UK steel producers. The Government should also publish updated guidance on how social and environmental …
Government response. 57. Since leaving the EU the Government has initiated a review of our public procurement rules with the aim of speeding up and simplifying our processes, placing value for money at their heart, and unleashing opportunities for innovation. In September …
Department for Business and Trade
29
Conclusion
Fourth Report - Liberty Steel and the f…
High-quality data will be essential for monitoring and improving compliance with steel procurement policy. However, this data is currently incomplete with only partial data being reported by Government Departments and Arm’s Length Bodies. We welcome the work of the Steel Procurement Taskforce in working to improve the quality of this …
Government response. 57. Since leaving the EU the Government has initiated a review of our public procurement rules with the aim of speeding up and simplifying our processes, placing value for money at their heart, and unleashing opportunities for innovation. In September …
Department for Business and Trade
30
Conclusion
Fourth Report - Liberty Steel and the f…
A requirement should be set for all Government projects, including steel contracts awarded by the Contracts for Difference scheme and Highways England, to fully report on the value and origin of their steel requirements.
Government response. 8 Liberty Steel and the Future of the UK Steel Industry: Government response
Department for Business and Trade
31
Recommendation
Fourth Report - Liberty Steel and the f…
Decisive action should be taken to ensure that UK steel producers do not miss out on the Government’s ambitious infrastructure programme. Setting minimum UK steel content targets for major public projects would serve as an important first step to improving opportunities for UK steel producers. The Government should introduce minimum …
Government response. 33. We welcome the Committee’s acknowledgment that BEIS acted properly in this matter, and that the British Business Bank rightly operated independently and made decisions in accordance with its own procedures and practices.
Department for Business and Trade
32
Conclusion
Fourth Report - Liberty Steel and the f…
Given that global steel markets continue to be heavily distorted by state subsidisation and that the EU and the US continue to apply tariffs on imported steel, the UK requires a response from Government regarding potential trade divergence towards UK markets and significant injury to UK steel producers.
Government response. 33. We welcome the Committee’s acknowledgment that BEIS acted properly in this matter, and that the British Business Bank rightly operated independently and made decisions in accordance with its own procedures and practices.
Department for Business and Trade
33
Conclusion
Fourth Report - Liberty Steel and the f…
We share the concerns expressed to us that the Trade Remedies Authority’s recommendation to revoke safeguards on nine categories of steel imports was not based on an open dialogue with industry and had therefore missed the wider impact its decision would have had on UK steel producers. These concerns also …
Government response. 33. We welcome the Committee’s acknowledgment that BEIS acted properly in this matter, and that the British Business Bank rightly operated independently and made decisions in accordance with its own procedures and practices.
Department for Business and Trade
34
Conclusion
Fourth Report - Liberty Steel and the f…
There is a clear lack of direction with respect to the future of the nation’s blast furnaces both within the Government and in industry. A range of options exist for the decarbonisation of primary steelmaking, including carbon capture and storage (CCS), hydrogen, or a mixture of technologies running in parallel. …
Government response. 77. We are working with the sector to better understand their decarbonisation investment plans. These plans may include switching to Electric Arc Furnace (EAF) production methods, carbon capture, usage and storage (CCUS) on existing blast furnaces, hydrogen steelmaking, or other …
Department for Business and Trade
35
Recommendation
Fourth Report - Liberty Steel and the f…
We found broad agreement that the UK should retain a primary steelmaking capacity rather than push its emissions and business abroad, a point recognised in the Government’s own Industrial Decarbonisation Strategy. However, if the Government is serious about its emissions targets and given that the nation’s blast Liberty Steel and …
Government response. 77. We are working with the sector to better understand their decarbonisation investment plans. These plans may include switching to Electric Arc Furnace (EAF) production methods, carbon capture, usage and storage (CCUS) on existing blast furnaces, hydrogen steelmaking, or other …
Department for Business and Trade
36
Conclusion
Fourth Report - Liberty Steel and the f…
We identified enthusiasm from many witnesses for the use of hydrogen direct reduced iron as a technology well-suited to decarbonising the UK steel industry. However, as with other potential solutions, it is a technology that remains untested at scale. A pilot of hydrogen-based steel production in the UK would help …
Government response. 77. We are working with the sector to better understand their decarbonisation investment plans. These plans may include switching to Electric Arc Furnace (EAF) production methods, carbon capture, usage and storage (CCUS) on existing blast furnaces, hydrogen steelmaking, or other …
Department for Business and Trade
37
Recommendation
Fourth Report - Liberty Steel and the f…
The Government should commit to a pilot of hydrogen-based steel production in the UK as part of its industrial decarbonisation strategy. Funding for the project should be sought in partnership with interested steel businesses or backed in part by the Clean Steel Fund. The Government should further consult on the …
Government response. 43. We recognise this is a worrying time for businesses facing pressures due to the significant increases in global gas prices, and the subsequent increases in electricity prices. Extensive engagement with industry continues across Government at both a ministerial and …
Department for Business and Trade
38
Conclusion
Fourth Report - Liberty Steel and the f…
Previously used steel, also known as scrap, will play a central role in efforts to decarbonise the UK steel industry. The high availability of scrap in the UK represents a valuable resource which is under-utilised, and a range of measures will be needed to ensure that the recycling of scrap …
Government response. 43. We recognise this is a worrying time for businesses facing pressures due to the significant increases in global gas prices, and the subsequent increases in electricity prices. Extensive engagement with industry continues across Government at both a ministerial and …
Department for Business and Trade
39
Conclusion
Fourth Report - Liberty Steel and the f…
Many of the challenges facing the UK steel industry today are long-running and have led to crises in the past. Without fundamental reform of energy pricing and a clear decarbonisation strategy, the sector will fail to attract much needed investment and continue on a path of accelerating decline. The Government’s …
Government response. 43. We recognise this is a worrying time for businesses facing pressures due to the significant increases in global gas prices, and the subsequent increases in electricity prices. Extensive engagement with industry continues across Government at both a ministerial and …
Department for Business and Trade
40
Conclusion
Fourth Report - Liberty Steel and the f…
A successful transition to net zero will be dependent on addressing the wider challenges and opportunities facing the UK steel industry. These issues will need to be tackled as part of a broader, strategic approach to decarbonisation.
Government response. 43. We recognise this is a worrying time for businesses facing pressures due to the significant increases in global gas prices, and the subsequent increases in electricity prices. Extensive engagement with industry continues across Government at both a ministerial and …
Department for Business and Trade
41
Conclusion
Fourth Report - Liberty Steel and the f…
The steel industry has faced a number of crises in recent years but action to support the sector has been taken on a mostly ad hoc, reactive basis. The sector cannot continue to lurch from crisis to crisis and action is needed now if the UK is to retain a …
Government response. 43. We recognise this is a worrying time for businesses facing pressures due to the significant increases in global gas prices, and the subsequent increases in electricity prices. Extensive engagement with industry continues across Government at both a ministerial and …
Department for Business and Trade
42
Recommendation
Fourth Report - Liberty Steel and the f…
We call on Ministers to establish a new Sector Deal for the steel industry. The Sector Deal should address long-running challenges to the sector’s competitiveness as part of a cohesive plan for decarbonising the industry. It should set out a range of supportive policies to assist this transition and a …
Government response. 43. We recognise this is a worrying time for businesses facing pressures due to the significant increases in global gas prices, and the subsequent increases in electricity prices. Extensive engagement with industry continues across Government at both a ministerial and …
Department for Business and Trade