This article is more than 3 years old

This article is more than 3 years old

British Steel will reinstate the salary it was paying workers before they accepted a pay cut last year, after predicting a return to full-year profits months after it appeared on the verge of collapse.

The Scunthorpe company, one of the two remaining steelworks in the UK, was sold to investment group Greybull Capital by Tata Steel last June, as the Indian-owned company shrunk its British operations in the face of heavy losses.

But British Steel said the plant had returned to profit in the first nine months of its financial year, in an update that will raise hope that new life can be breathed into steelmaking in the UK.

British Steel put the improvement down to cost cuts and “significant” contracts, including a £2m agreement to supply the steel for the new Hinkley Point C nuclear power plant in Somerset.

The Scunthorpe plant is believed to have lost £80m in the final year of Tata’s ownership, but is on course to make enough to cover £39m of investment and turn a profit.

Greybull is understood to believe it can reach an underlying profit of more than £100m by its third year of ownership.

Facebook Twitter Pinterest British Steel’s executive chairman, Roland Junck, hailed the results. Photograph: Lindsey Parnaby/AFP/Getty Images

British Steel’s revived fortunes have resulted in it pledging to reverse a 3% salary cut agreed with 4,400 employees to help save the steelworks. Restoring workers’ salaries will cost the company about £9m and is due to take effect in June.

Paul McBean, the British Steel multi-union chairman, said: “We’ve shown we’re fighters, we’ve shown we’re survivors and now we’ve got to show that we can become industry and national champions.”

British Steel’s executive chairman, Roland Junck, said: “I’m pleased to report that after our first seven months of trading, we are building on our promising start to life as British Steel.”

Junck previously said the business became profitable again 100 days after Greybull bought Tata’s long products division for £1 and revived the dormant British Steel brand, vowing to invest £400m.

In an update on Wednesday, he said the business was trading in the black and could grow thanks to the Hinkley supply deal and contracts to make rails for the Algerian and Italian train networks.

“Having implemented the first stage of our turnaround plan, returning the business to profit and putting it on a sustainable footing, we are now well positioned to implement the next stage of the plan,” he said. “We’re already making good progress with significant contract awards from both new and existing customers.”

Greybull bought the company after the UK steel industry had been under pressure for several years due to factors including a flood of cheap Chinese products on to the market, which sent prices tumbling.



The crisis threatened the future of several major steelworks, including Tata-owned Port Talbot, whose staff are shortly due to vote on a cost-cutting plan that would see their final salary pension scheme closed.

But Junck said British Steel could still carve out a bright future, despite continuing pressure on the industry. “Domestically we are in a unique position to provide large quantities of steel for developments through the UK, whether that be major infrastructure projects such as HS2 and Heathrow [expansion], or smaller projects such as the building of new schools or hospitals,” he said.

He said the company was enjoying support from the governments of the UK and France, where it also has a comparatively small business.

Junck previously claimed that Tata Steel had “lost interest” in the Scunthorpe steelworks before it was sold to Greybull.

The investment group celebrated the takeover by restoring the name British Steel, which disappeared in 1999 when its predecessor merged with a Dutch rival to become Corus.

Corus was later bought by Tata Steel before the company, part of Indian conglomerate Tata, began looking for a way out of the UK steel industry.