The Chinese owner of British Steel has hired a leading City law firm to explore the recovery of hundreds of millions of pounds it invested in the Scunthorpe-based company before the government seized control of its operations in April.
Sky News has learnt that Jingye Group has appointed Linklaters – which advised it on its purchase of British Steel in 2020 – to evaluate legal options for recouping part of its outlay.
It was unclear on Tuesday which potential routes Jingye was exploring with Linklaters, or whether a formal legal challenge to the government was under consideration.
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British Steel’s balance sheet bears debts worth close to £1bn, most of which is said to be owed to Jingye in the form of inter-company loans.
The Financial Times reported last month that ministers were exploring the controversial use of new legislation to wipe out those debts in order to smooth a path to the sale of the business.
The government and Jingye had been at loggerheads for weeks over the future of the Scunthorpe plant’s blast furnaces.
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Since Jonathan Reynolds, the business secretary, moved to commandeer control of the UK’s second-biggest steel producer, the government has sourced additional supplies of raw materials to ensure the furnaces’ continued operations.
Jingye had been preparing to close them – with the loss of thousands of jobs – after seeking £1bn in state aid to facilitate the site’s transition to greener steelmaking.
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Mr Reynolds has indicated that Jingye’s shares in British Steel – which has not yet been formally nationalised – are worthless, and that the government does not intend to offer to pay to acquire them.
A Jingye spokesperson said: “Jingye can confirm that Linklaters has been appointed; they were the original advisers on the acquisition in 2020.”
A spokesman for the Department for Business and Trade said: “We acted quickly to ensure the continued operations of the blast furnaces but recognise that securing British Steel’s long-term future requires private sector investment.
“We are working closely with Jingye and a range of third parties on options for the future, and we will continue work on determining the best long-term sustainable future for the site.”
