The Royal Navy is facing questions over whether three new warships will be built with British steel as its Scottish supplier faces deepening financial difficulties.
Liberty Steel Dalzell, a plate mill in Motherwell, has struggled to pay its bills and workers in recent weeks, according to several people with knowledge of operations.
The government said it was “closely monitoring” the situation at the plant, amid growing concerns over its survival.
The National Energy System Operator (Neso), the government body in charge of keeping the lights on, filed a winding up petition against the company last month, according to public court records. It is understood that its debt, thought to be for electricity transmission charges, has now been repaid and the petition will be withdrawn.
The Dalzell plant has an order to make 34,000 tonnes of metal plate to build the navy’s fleet solid support (FSS) ships. They are due to be built in Belfast by the Spanish state-owned shipbuilder Navantia in a £1.6bn contract.
The financial struggles of Liberty Steel Dalzell and its owner, the Gupta Family Group (GFG) Alliance controlled by the metals tycoon Sanjeev Gupta, have cast doubts on whether the plates will ever be made. The Dalzell mill is the only one in Britain capable of producing the plates needed, but its output has been limited for two years because of shortages in working capital.
The first of the 216-metre FSS ships, designed to carry munitions, food and other supplies for the navy’s Royal Fleet Auxiliary, is planned to be delivered in 2031. The contract was awarded to Navantia in the hopes of revitalising Belfast’s historic Harland & Wolff shipyard that built the Titanic.
Several people in the industry and unions believe Dalzell could be part of an integrated British supply chain if it had working capital. British Steel’s Scunthorpe blast furnaces, now under government control, could supply metal to Dalzell to make the plates that are then used in Belfast to build the ships.
However, the longer Dalzell goes without producing the steel, the more likely Navantia is to source the metal elsewhere. Navantia has already said it would build the first ship largely in Spain because the Harland & Wolff shipyard was not yet ready, in comments to the Financial Times in September.
Unions have called for the government to protect the Dalzell plant. Alasdair McDiarmid, the general secretary of the Community union, said: “We need to see a viable plan for Dalzell’s long-term future – the workforce deserve nothing less. If Liberty cannot produce this now, the case for government intervention will be unavoidable. We simply cannot afford to lose this crucial asset for Scotland, and for the entire UK steel sector.”
A government spokesperson said: “This has been a difficult situation for the staff and local community supporting Liberty Dalzell. We want to see the company operational once more, and are closely monitoring the situation.
“Navantia UK has a ‘local first’ policy when it comes to suppliers for the fleet solid support programme. Ministers have encouraged Navantia UK to use UK suppliers, including for steel, where possible.”
The Dalzell plant has produced some plate in recent weeks, using steel that is said to have been sourced from Kazakhstan, but that is not suitable for the defence contract.
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Workers’ pay packets have been late twice in recent months, including at the end of October. Staff are also concerned because the pension provider Aviva said it was “currently unable to accept further pension contributions into the workplace pension plans for members of this scheme”.
A GFG spokesperson said the company was “engaging with Aviva and the Pensions Regulator to fix this as quickly as possible”.
It is also understood that the company providing security to the Dalzell site walked away over the weekend after its bills were unpaid.
Gupta’s businesses have been under financial pressure for several years because of the collapse of his main lender, Greensill Capital, in 2021. Companies within GFG remain under investigation by the UK’s Serious Fraud Office for suspected fraud, fraudulent trading and money laundering.
A GFG spokesperson said: “Like the rest of the UK steel industry, Dalzell faces tough operating conditions with energy costs far higher than the prices its international competitors pay. Despite that the plant has restarted and GFG are pursuing new commercial deals to bring more volume through the mill.
“The Navantia contract remains in place and Dalzell’s UK slab supplier has indicated capacity from early next year.”
A Neso spokesperson said the body could not comment on specific debt recovery cases.
