British Steel Faces Uncertain Future as Auditors Warn of Cash Injection Requirement
British Steel’s financial stability is in doubt as auditors raise concerns over the company’s ability to continue operations without additional funding from its Chinese owner.
British Steel, the UK’s second-largest steelmaker with a workforce of 4,500, has been cautioned by auditors at Moore Kingston Smith about “material uncertainty” regarding its financial viability. This revelation comes shortly after the company finally released its delayed financial filings for 2021. To add to the concern, the auditors abruptly resigned, a mere year after their appointment.
Potential Job Losses Loom Over British Steel’s Future
A potential crisis in British Steel’s future raises fears of significant job losses within the struggling manufacturer. Such a scenario would further compound the pain already faced by the UK steel industry after Tata Steel announced the planned shutdown of two blast furnaces at its Port Talbot steelworks in Wales. This phase-out is expected to result in approximately 2,800 job losses and has been decried as a “devastating blow” by the Community union.
Need for Further Funding from Jingye, British Steel’s Chinese Parent Company
In its earnings report, which was released over a year later than anticipated, British Steel’s auditors warned of the company’s reliance on additional funding from its parent company, Jingye. It was Jingye who rescued British Steel from potential collapse in March 2020. While the company directors expressed confidence in securing funding for the next 12 months, auditors emphasized the “material uncertainty” surrounding the company’s ability to continue operating without another cash injection from its Chinese owners.
Financial Losses and Uncertainty Surrounding Stock Existence
The release of the financial filings revealed a sharp decline for British Steel, reporting a loss of £51 million for 2021 compared to a £268 million profit the previous year. The detrimental impact of soaring energy costs in October 2021 was cited as a primary factor for this stark reversal.
Furthermore, auditors expressed concerns about £45.8 million worth of stock and their inability to verify its existence through “alternative means.”
Resignation of Auditors Signals Deepening Troubles
In another blow to British Steel’s credibility, auditors Moore Kingston Smith have resigned from their position just days after the alarming financial report was made public. This follows the resignation of their predecessor, Mazars, who departed due to disagreements over fees. Such a series of auditor departures further undermines confidence in the company’s financial stability.
Uncertain Future and Lack of Comment from British Steel
The unfortunate state of affairs surrounding British Steel’s finances and the resignation of its auditors has left the future of the company uncertain. Despite inquiries, British Steel has yet to respond to requests for comment on the matter.
Please see the article here for details about British Steel’s ongoing challenges.
Analyst comment
Negative news: British Steel Faces Uncertain Future as Auditors Warn of Cash Injection Requirement.
Market analysis: The future of British Steel looks uncertain as auditors express concerns about the company’s financial viability and the need for additional funding from its Chinese parent company. Job losses and stock uncertainties are further contributing to the market’s negative outlook for the steelmaker.
