Full transfer of ownership to pension fund Oyak expected to take place before end of year

The Turkish military pension fund Oyak has entered exclusive talks over a rescue deal for British Steel that could save more than 4,000 jobs, after months of talks with the government.

Trade unions and Labour welcomed progress on sale talks but said they were seeking assurances on Oyak’s attitude to labour rights, amid concern about its track record in Turkey.

British Steel's Turkish buyer owned by Oyak military pension fund Read more

Oyak’s subsidiary, Ataer Holding, will have two months to perform due diligence on British Steel, which collapsed into insolvency in May. A full sale is expected before the end of the year.

The Turkish company has yet to reveal the finer details of its plans, but told the government that it wanted to inject £900m into the Scunthorpe steelworks to more than double its output. The plant is where most of British Steel’s staff work.

Quick guide What went wrong at British Steel? Show Hide What plans does Jingye have for British Steel? Jingye's financial profile is relatively opaque, but the company is expected to pledge investment worth £1bn over the next decade. A person briefed on Jingye's thinking said the company wanted to preserve as many jobs as possible, but could not say how many of the company's 4,000 workers would keep their jobs. British Steel accounts for a third of UK production, so is seen as a key national asset in many quarters.

What went wrong at British Steel? When Greybull Capital bought British Steel in 2016 it promised great things. The private equity firm pledged to invest £400m and within months it was boasting of a return to profit and a bright future ahead. Three years later it collapsed. In a letter to staff, the British Steel chief executive blamed weak market demand, high raw material prices, the weakness of sterling and uncertainty over the outcome of Brexit discussions. Who is Jingye? Jingye emerged as the most likely owner after talks with Ataer, a division of the Turkish military pension fund Oyak, fell through in October. Founded in 1988 by a former Communist party official, Li Ganpo, the Chinese conglomerate has hotel and retail interests. However, steelmaking, which it started doing in the early 1990s, is now its primary focus: its Chinese mills produce about 15m tonnes of steel a year, exporting to 80 countries. How much is Brexit to blame? It is not the only factor in the crisis, but it is important and will remain crucial even if Jingye buys British Steel. Steel contracts are typically agreed well in advance of the product being delivered. As things stand, the UK is due to leave the EU on 31 January after another delay, and the terms of that separation are yet to be agreed, meaning British Steel’s overseas customers do not know what tariffs will apply to steel they buy from the company. Sources close to the company said orders from customers in the EU and further afield had dried up as a result. Is the whole UK steel industry in trouble? The UK steel industry has been in decline for some time because of a variety of factors such as overcapacity in EU steelmaking and Chinese state-subsidised firms flooding the global market with cheap product. An industry that employed 323,000 people in 1971 now employs less than a tenth of that, at 31,900. The closure of the Redcar steelworks in 2015 was a significant blow to the sector and left the UK with only two blast furnace steelworks: Scunthorpe and the Tata Steel-owned Port Talbot in south Wales.

The business secretary, Andrea Leadsom said: “This is an important and positive step forward in securing the future of British Steel.

“I said that no stone would be left unturned in our efforts to find a suitable buyer for the whole company and we have worked tirelessly to support the official receiver to do that.

“I want to thank British Steel’s employees for their continued dedication and hard work throughout, which I saw first-hand when I visited Scunthorpe recently.

“The UK has a long and proud history of steel manufacturing and I am committed to a modern and sustainable future for the industry that is productive and supports a skilled and highly valued workforce.”

Facebook Twitter Pinterest The business secretary, Andrea Leadsom, says she is ‘committed to a modern and sustainable future for the steel industry’. Photograph: Anthony Harvey/Rex/Shutterstock

The official receiver David Chapman, who is handling the sale alongside the accountancy firm EY, said: “I will be looking to conclude this process in the coming weeks, during which time British Steel continues to trade and supply its customers as normal.”

On Thursday, the Guardian reported that Oyak was accused of corruption by a Turkish parliamentary commission, and jointly owns a Renault car plant where striking workers were allegedly mistreated.

Oyak declined to comment but said it had high standards of transparency and has no involvement in management of the car plant.

Turkey’s president, Recep Tayyip Erdoğan, has been accused of being an autocratic leader intolerant of dissent. The country has Nato’s second largest armed forces, whose retirement income is Oyak manages. The fund is chaired by a former army general.

In the UK, the shadow business secretary, Rebecca Long-Bailey, said: “Given the company’s track record, Labour will hold the government to account if there are any moves to undermine the unions and workers’ terms and conditions.”

Rachel Reeves, a fellow Labour MP who chairs the business select committee, said she would ask Ataer to explain its “plans for the workforce” as part of an inquiry into the future of the UK steel industry.

A spokesman for Unite said it was talking to its sister unions in Turkey and would be “scrutinising the labour and human rights records of Oyak operations carefully.”

Roy Rickhuss, the general secretary of steelworkers’ union Community, said: “The high-quality jobs of the existing workforce must be secured to support the 25,000 families in north Lincolnshire and the north-east that depend on British Steel for their livelihoods.”

Ataer was widely expected to be the preferred bidder after promising to keep British Steel’s operations together, rather than seeking to cherrypick the best assets. The government also committed to providing a £300m support package of grants, indemnities and loans in an efforts to push through the deal.

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Oyak, based in the Turkish capital, Ankara, is thought to be paying paid £70m for British Steel.

The £15bn pension fund staved off competition from Liberty House, the UK-based conglomerate run by the Indian-born businessman Sanjeev Gupta. Greybull Capital, the private equity owner of British Steel when it collapsed, was also interested in buying back parts of the business.

Toker Özcan, Oyak’s head of mining and metallurgy, said: “The acquisition of British Steel under the Ataer umbrella is the first step in the future plans of our group. Our priority will be to increase the production capacity and to invest in clean steel production in British Steel.”

In a statement on its website, Oyak described the potential deal as “one of the biggest achievements of the Turkish steel industry”.