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Why the British Steel crisis is not about Brexit

There’s a strong sense of déjà vu in this week’s steel crisis. The whole Brexit saga seems to have been bookended by trouble in what’s left of the British steel industry, beginning in 2016 when Tata of India announced plans to sell its entire UK steel business — the remnants of the privatised British Steel, later called Corus. The focus then was on the future of the blast furnaces at Port Talbot, but a buyer was found for the Scunthorpe ‘long products’ plant, at a price of £1, in the private equity firm Greybull Capital. Now 4,000 Scunthorpe jobs are at risk as Greybull prepares to throw in the towel: unless ministers come up with a last-ditch rescue loan, administrators were expected to be appointed by midweek.

And it will be all too easy to blame Brexit, but as ever there’s more to the story. Greybull — two French brothers and a Swede, investing family money from a base in Sloane Street — are the crew that also struck out as owners of the now defunct Monarch Airlines, and have dabbled in convenience stores and sports bars. ‘Helping firms through choppy waters’ is what they claim to be good at, and buying a steel mill for £1 must have felt like a pretty good opportunity at the time, But they took on Scunthorpe without either the heavy industrial experience or the very deep pockets that might have seen it through.

Experts say the plant had a fighting chance of survival, particularly as a maker of steel rails for which there are relatively few global suppliers, but that it lacked critical scale. Latterly it has suffered from the weakness of the pound against the dollar, from cyclical downturns in construction and civil engineering, and from the nationalistic buying patterns of the Europeans, who regardless of Brexit always tend to support their own suppliers first. And Greybull was the wrong kind of buyer, because the steel business is too capital-intensive and long-term for the usual parameters of private equity. If a hard-bitten industrial combine like Tata couldn’t make a go of it, whoever imagined these Knightsbridge moneymen could?

Virtue investing


Most of your responses to last week’s Any Questions challenge (‘What one thing are you going to change in your own life in response to the climate emergency?’) were so naughty that I wondered whether I should offer this week’s column space to 16-year-old activist Greta Thunberg to give you a ticking-off. ‘Give up shaving, install a bidet, recycle wine corks and stop wasting electricity on bitcoin and Emma Thompson films’ were some of the eye-catchers; among the less facetious, I liked ‘Marry well, work hard, educate your children and see what they can achieve for the world’.

My own conclusion is that we should renounce virtue-signals and focus instead on investing in technologies that have the potential to make a difference. Our UK Optimist Fund portfolio (on which more news soon) already includes PowerHouse, which converts plastic waste to energy, and Ilika in advanced battery science. Our veteran investor Robin Andrews reminds me that he has previously drawn attention to ITM Power, the UK leader in hydrogen fuel solutions, and other battery ventures such as Ceres; he’s also watching Shell, which is ‘putting more into green projects than any shoal of minnows can’. Another reader mentions cheap renewable energy suppliers Octopus and Bulb, which don’t yet have listed shares but may do soon. More non-facetious suggestions please: martin@spectator.co.uk.

What due diligence?

I’ve been reading Billion Dollar Whale, by Wall Street Journal writers Tom Wright and Bradley Hope. Their strapline is ‘the inside story of Jho Low and the 1MDB scandal’ — the latter being the alleged misappropriation of billions of dollars from a Malaysian sovereign wealth fund that were used to pay for political corruption, yachts, luxury real estate, wild parties and the making of The Wolf of Wall Street. Legal sensitivities are such that the book isn’t on sale in the UK; suffice to say that former Malaysian prime minister Najib Razak is currently on trial, the role of Goldman Sachs in raising money for the fund is under investigation, and the financier Jho Low is a fugitive, reportedly in China.

But what really struck me about this complex tale, apart from its sheer vulgarity, was the incompetence of banks that failed time after time to exercise due diligence over giant transfers to unlikely recipients: for example, $700 million supposedly intended for a 1MDB joint venture with a Saudi oil group that was sent by Deutsche Bank in Malaysia to RBS Coutts in Zurich for the account of a one-share company in the Seychelles. Next time you’re irritated by endless ‘security questions’ before your bank will respond to a modest request for help, demand to know whether it ever had any customers connected to 1MDB.

C’est notre faute?

‘How’s business?’ was the wrong question to ask Grégoire, the chef of our village bistro — in which I was, at that moment, the sole paying customer. But still I was surprised when his answer began ‘Alors, le Brexit…’. ‘Vraiment?’ I retorted: ‘C’est notre faute?’ ‘En plus, les gilets jaunes…’ he conceded, and he might have gone on to point out how many local shops have closed since last summer, amplifying the palpable despondency of Macron’s France. ‘Ah well,’ I would have continued if I’d wanted debate rather than dinner, ‘maybe the kicking that’s coming in this week’s European elections will galvanise the President to press on with reforms that might help businesses like yours.’

But I fear it won’t, so small entrepreneurs like Grégoire and his partner Laetitia will battle on against the economic tide — and the best I can do for them is to turn this item into one of the restaurant tips with which I always mark my trips to France. The place in question is L’Envie des Mets at St Pompon (Dordogne): its gravlax of pollock and braised spiced beef are worth the detour.


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