Sources confirm the government is prepared to block a £500m payout to the owners of British Steel. A Whitehall memo, uncovered by this paper, reveals ministers are reviewing a clause that would allow a sovereign veto over the transfer of funds to Greybull Capital, the private equity firm that bought the steelmaker for a nominal £1 in 2016.
The memo, dated last week and marked ‘sensitive’, states that the government is ‘considering all options’ to prevent the payout, which is linked to a loan guarantee agreement struck during the 2016 sale. The clause, known as a ‘change of control’ provision, gives the state the power to block payments if it deems the owners are not acting in the national interest.
Greybull Capital had been expecting the payout as part of a restructuring deal that would see British Steel’s pension scheme transferred to the Pension Protection Fund. But the government’s move signals a hardening of stance, with one source saying: ‘They are not just going to hand over half a billion pounds to a firm that has already extracted millions in fees.’
The move comes amid growing public anger over corporate bailouts and the government’s handling of the steel industry. British Steel employs 4,000 people directly and supports thousands more in the supply chain. The company has been struggling with high energy costs and dumping from China, and has already received a £120m emergency loan from the government last year.
But the memo suggests that ministers are now questioning whether Greybull Capital is the right owner for the strategic asset. One official described the firm as ‘short-termist’ and criticised its refusal to invest in new technology. The memo warns that if the payout is made, Greybull could walk away, leaving the government to pick up the pieces.
A spokesperson for the Department for Business, Energy and Industrial Strategy said: ‘We do not comment on leaked documents. The government is committed to supporting the steel industry and ensuring a sustainable future for British Steel.’ Greybull Capital declined to comment.
This is not the first time the government has used a sovereign veto. In 2017, it blocked the sale of Hinkley Point C to EDF on national security grounds. But the move would be unprecedented for a domestic firm. Legal experts say the clause is ‘broadly drafted’ and could withstand a legal challenge, but they warn that Greybull may seek compensation through arbitration.
The steel industry has been a politically sensitive issue since the closure of the Redcar plant in 2015. The government has been criticised for not doing enough to protect the sector. This latest development will be seen as a test of its resolve to hold corporate owners to account.
The payout is due to be triggered by the transfer of the pension scheme, which is expected to happen in the coming weeks. But the government’s veto could delay the process and throw the whole restructuring plan into doubt. Union leaders have welcomed the government’s stance but are demanding a clear plan for the industry’s long-term future.
I have seen the memo. It is real. The government is serious. This is a story about power, money and the failure of corporate governance. And it is far from over.
