British Steel’s financial footing has been thrown into question after auditors warned of “material uncertainty” over the struggling manufacturer’s ability to operate without a fresh cash injection from its Chinese owner.
The auditors at Moore Kingston Smith also unexpectedly resigned just days after the company released delayed its financial filings for 2021. The auditor had been appointed only a year earlier.
The problems at the UK’s second largest steelmaker could threaten a large number of the jobs of its 4,500-strong workforce, compounding the pain for Britain’s steel industry, which is already grappling with Tata Steel’s planned shutdown of two blast furnaces at Port Talbot. The decision by the Indian-owned firm will result in up to 2,800 job losses, and has been condemned as a “devastating blow” by the Community union.
In an earnings report released more than a year after they were due at Companies House, the auditor warned that British Steel “need further funding from its ultimate parent company”, Jingye, which rescued the firm from collapse in March 2020.
While the company’s directors said they were confident that they would have enough funding for the following 12 months – effectively to the end of 2022 – auditors said there was “material uncertainty” over its ability to continue operating without another cash injection.
The Scunthorpe-based company reported a loss of £51m for 2021, having reported a £268m profit a year earlier, due in part to a sudden surge in energy costs in October, which the company said had a “significantly adverse impact on product margins”.
Auditors also signalled that they were unable to “satisfy ourselves” over the existence of £45.8m worth of stock, despite trying to verify it through “alternative means”.
Filings at Companies House now indicate that Moore Kingston Smith has resigned from its role, just days after the release of the report, and a year after its predecessor, Mazars, quit due to disagreements over fees.
British Steel did not immediately respond to requests for comment.
