The Controversial Deal That Staked Taxpayer Millions

In 2016, the Scottish Government under Nicola Sturgeon's leadership orchestrated what now appears to be an increasingly precarious financial arrangement with Sanjeev Gupta's GFG Alliance. The deal involved purchasing two steel mills from Tata Steel for a nominal £1 before transferring them to Gupta's business empire, supported by a £7 million taxpayer-funded loan. More significantly, the SNP administration provided nearly £600 million in loan guarantees to facilitate Gupta's acquisition of the Lochaber aluminum smelter near Fort William. This substantial financial commitment was presented at the time as a strategic intervention to preserve Scotland's industrial capacity and protect hundreds of jobs. However, the current situation at the Dalzell and Clydebridge mills in Lanarkshire paints a concerning picture, with workers reportedly furloughed on 80% pay as Scotland's last working steel mill stands idle. The arrangement, once touted as visionary industrial policy, now faces intense scrutiny as the financial stability of Gupta's wider business interests comes into question.

Liberty Steel's UK Operations Face Legal Challenges

Liberty Speciality Steels UK, a component of Gupta's sprawling business empire that does not include his Scottish operations, now faces a winding-up petition brought by Harsco Metals Group, a supplier of materials and labor. Reports indicate that other trade creditors support this legal action, which could potentially force SSUK into compulsory liquidation unless an adjournment is granted. The company operates facilities in Rotherham, South Yorkshire, and Bolton, Lancashire, producing specialized steel products for aerospace, automotive, and energy sectors. Despite attempts by Gupta to secure government intervention similar to the support provided to British Steel, the UK Government has reportedly declined to offer a bailout. Liberty Steel has attributed its difficulties to long-standing challenges in the UK steel sector, including high energy costs and competition from cheaper imports, compounded by the collapse of its main lender, Greensill Capital, in 2021. The company claims its shareholder has invested nearly £200 million over the past four years to sustain operations.

Potential Ripple Effects on Scottish Operations

While Liberty Steel maintains that the proceedings against Speciality Steel UK "have no relation to and effect on the Scottish businesses," industry experts and politicians have expressed significant concern about potential ripple effects throughout Gupta's business network. The interconnected nature of the GFG Alliance's financing and operations raises questions about whether financial distress in one segment might eventually impact others. Hundreds of Scottish workers at the steel mills and aluminum smelter face an uncertain future as these legal proceedings unfold. The Scottish Government still has outstanding financial exposure through its loan guarantees, creating a situation where taxpayer funds remain at risk. The current circumstances have prompted calls for urgent action to secure the future of these industrial sites, particularly given their strategic importance to Scotland's manufacturing base and the specialized skills of their workforce.

Political Fallout and Calls for Government Intervention

The deteriorating situation has triggered political responses across party lines. Scottish Conservative Justice spokesperson Jamie Greene highlighted longstanding concerns about Liberty Steel's stability, noting that his party had previously warned about potential collapse and had written to the Deputy First Minister when problems at Dalzell became apparent. Greene called for urgent cooperation between the UK and Scottish governments to develop "a joined-up strategy for this vital Scottish business," emphasizing the plant's potential contributions to industries like wind power. The Scottish Liberal Democrats have echoed these calls for collaborative intervention. The situation presents a political challenge for the current Scottish administration, which inherited the financial commitments made under Sturgeon's leadership. The outcome will likely influence public perception of the SNP's approach to industrial policy and financial management, particularly regarding large-scale government guarantees to private businesses.

UK Government's Cautious Stance

The UK Government has adopted a measured position regarding Liberty Steel's difficulties. A spokesperson for the Department for Business and Trade stated that they continue to "closely monitor developments around Liberty Steel, including any public hearings," while emphasizing that these matters are "ultimately for Liberty to manage." The statement expressed hope that the company would succeed with its plans to continue operating on a sustainable basis but stopped short of offering direct intervention. This cautious approach contrasts with the more interventionist stance taken by the Scottish Government in 2016 when it provided substantial financial guarantees to support Gupta's acquisition of the Scottish assets. The divergent approaches highlight different philosophies regarding government involvement in industrial policy and raise questions about the appropriate level of public sector risk exposure when supporting private businesses in strategically important sectors.

Industrial Strategy and Economic Impact

The unfolding situation at Liberty Steel raises broader questions about industrial strategy in Scotland and the UK. The steel industry has long been considered strategically important, providing high-skilled manufacturing jobs and supporting domestic supply chains in critical sectors like defense and energy. However, global competition, high energy costs, and environmental regulations have created significant challenges for steel producers across Europe. The potential failure of Liberty's operations would represent another setback for UK steel manufacturing, which has experienced substantial contraction over recent decades. For Scotland specifically, the loss of steel-making capacity would further erode its industrial base and limit opportunities for future manufacturing growth. The Dalzell plant's potential role in supporting renewable energy infrastructure, particularly the wind industry, underscores the strategic importance of maintaining domestic steel production capabilities as part of the transition to a low-carbon economy.

Legacy of Sturgeon's Industrial Interventions

The current crisis casts a shadow over Nicola Sturgeon's legacy of industrial interventions. The 2016 deals with Gupta were presented as bold moves to save strategic assets and protect jobs, but critics now question whether sufficient due diligence was conducted regarding the long-term viability of Gupta's business model. The provision of nearly £600 million in loan guarantees represented a substantial commitment of public resources and potential liability. While the full financial implications remain uncertain, the situation highlights the risks associated with government backing for private businesses, particularly in volatile industrial sectors. As Scotland's current leadership grapples with the consequences of these past decisions, the outcome will likely influence future approaches to industrial policy and the use of public guarantees as economic development tools. The experience may prompt greater caution regarding large-scale financial commitments to private sector entities, even when pursuing legitimate objectives like preserving industrial capacity and employment.

Key Takeaways:

• Former First Minister Nicola Sturgeon's £586 million taxpayer-backed deal with Sanjeev Gupta's GFG Alliance is under renewed scrutiny as Liberty Speciality Steels UK faces a winding-up petition from creditors, potentially affecting Scottish steel mills where workers are already furloughed on 80% pay

• Liberty Steel maintains that proceedings against its UK specialty steel operations "have no relation to and effect on the Scottish businesses," despite concerns about potential ripple effects throughout Gupta's interconnected business network that employs hundreds of Scottish workers

• Politicians have called for urgent cooperation between UK and Scottish governments to secure the future of Scotland's last steel mills, with Scottish Conservative Jamie Greene highlighting the Dalzell plant's potential in supporting the wind industry while criticizing the SNP's handling of the original deal