Forgemasters to put on hold nuclear plans

The heavy engineering firm was caught in an explosive political row last year when the coalition controversially axed an £80m loan agreed with Labour ministers before the general election.

The soft loan was to have helped fund a £160m project to build a 15,000-tonne forging press to manufacture components for the next generation of nuclear power stations.

Labour MPs questioned Prime Minister David Cameron last month on representations from the Deputy Prime Minister, Sheffield Hallam MP Nick Clegg, about reinstating the loan.

Mr Cameron responded that Sheffield Forgemasters had been encouraged to bid under the £1.4bn fund.

“It’s getting near to the elections, lots of people are starting to speculate obviously and asking what’s going on,” said Graham Honeyman, the managing director. “We are very keen not to be seen as a political football.”

The city of Sheffield, currently held by the Liberal Democrats, is a target for Labour in May’s local elections.

Dr Honeyman’s management team had looked at submitting a bid to the fund, which is designed to help areas hit by public sector spending cuts, but could not make the first deadline of January.

The company considered applying before the second deadline this July, but has now decided to put the project on hold until next year.

Dr Honeyman said the first reason for the delay is to wait for the outcome of the report by the UK and other governments into nuclear safety following the nuclear disaster in Japan.

He does not expect to see any significant change to UK nuclear policy and said the new generation of nuclear power stations, such as those built by Areva and Westinghouse, are more safety orientated than older plants like Fukushima.

Meanwhile, international competitors have started building 15,000-tonne presses planned to build, another reason behind the decision to delay the project.

“There is going to be more competition,” said Dr Honeyman. “We have to assess that competition. That’s something you can’t do overnight. We have to look at the strategy.”

The third reason is that prices have risen since the expansion plan was conceived.

Dr Honeyman said his team spent two-and-a-half years working on the original loan application to the Department for Business Innovation and Skills.

“We spent a lot of time and effort and now we have to revisit everything because the world has moved on,” he added. “For example, the price of steel has gone up. Some of the project people did it for nothing; this time around they won’t.”

The likely supplier of the press, a Korean firm, has since gone out of business, another reason to hold fire.

“This project will cost more money,” said Dr Honeyman. “Where will the Government and our backers stand on that?”

Private equity, at the behest of the Labour Government, and Westinghouse had committed to help fund the original project, added Dr Honeyman.

In a statement for the Yorkshire Post, Business Secretary Vince Cable said: “We understand that Sheffield Forgemasters is currently re-examining its business plan over the next few months.

“As an award-winning manufacturer supplying some of the largest precision forgings and castings in the world, the Government will continue to talk to Forgemasters about its plans for growing its business.”

Paul Blomfield, Labour MP for Sheffield Central, added: “It is positive to see that the 15K tonne project is still alive, although understandably delayed as market demand is clarified, and that careful consideration is being given to the best way of bringing it to fruition.”

While those plans are on hold, Dr Honeyman was keen to emphasise that the £100m turnover company was developing other areas of business, such as novel forging techniques for the nuclear industry.

“We are also looking at potential acquisitions,” said the MD, citing three targets, two of which are in Yorkshire. “We want to do that because we need to grow the company. We grew from £38m to £100m. If we had the press, it would have grown to £250m.”

Decision was a hammer blow

The decision to axe the £80m loan to Sheffield Forgemasters had a “devastating” impact, said managing director Graham Honeyman.

Former Business Secretary Lord Mandelson waited until shortly before the May general election to announce the deal, but it was cancelled soon after.

The new forging press would have created 400 direct jobs, multiple others in the supply chain and transformed the company into a world leader in the new market for next-generation nuclear power stations.

“It would have taken the company into another atmosphere,” said the MD.

He added: “We imagine a 15,000-press is right for the company and the country.”