Shareholders at Sheffield Forgemasters have agreed to sell their entire share capital to the MoD in a deal worth £2.56m.
The nationalisation will support a substantial recapitalisation of the firm’s defence-critical plant, equipment and infrastructure necessary to secure the delivery of components into future MoD programmes.
David Bond, CEO at Sheffield Forgemasters, told The Yorkshire Post that the deal, which will see the MoD invest up to £400m over the next decade, was “great news” for the business, it’s customers, employees and the local economy.
“It really secures the long term future for a business that has a long legacy,” he added. “It will hopefully give us a more vibrant business. We’re certainly not looking to downsize.”
The 215-year-old business has more than 600 employees based at its 64 acre site in Sheffield.
Steve Turner, assistant general secretary for manufacturing at the Unite union, said the deal will end “years of instability”.
“Critical infrastructure industries like steel function better in public hands and advanced economies like our own need to have stable, secure domestic steel production capabilities to protect our national security interests as well as to compete in global markets,” he added.
Sheffield Forgemasters has been in discussions with the MoD for two years about the takeover.
Mr Bond says that no job cuts have been discussed and that it is about upgrading facilities and equipment to make sure they are fit for purpose when it comes to delivering major defence programmes.
He added: “Three years ago we stabilised the business - improved its financial outcome, reduced its debt and made it modestly profitable.
“But when you look at the scale of equipment we have on this big site and it’s age, it was clear that major investment was required to replace some of that equipment.
“With the economics of the business in its current form, we would never be able to afford to do that.”
Both the business and the MoD came to the conclusion at an early stage that taxpayers' money would be required to safeguard the supply chain.
“We could carry on with a sticking plaster strategy of just trying to fix the bare minimum but it was just going to put the submarine programme at even more of a risk over time.
The company’s main driver of revenue and profitability over recent years has been manufacturing specialist forgings and castings for submarine platforms and surface vessels as a supplier to Rolls-Royce, BAE Systems and Babcock International, who have provided guarantees to support the financing of the company.
With the firm’s existing credit facilities due to expire in December and significant investment required for it to be a reliable supplier into MoD, the intervention provides the financing necessary to place Sheffield Forgemasters on a secure footing.
“This is not a knee jerk reaction to recent circumstances,” Mr Bond said. “This is a well planned process that we have enacted today.”
The Northern Powerhouse Partnership welcomed the move by the Government to acquire Sheffield Forgemasters.
Henri Murison, director of the Northern Powerhouse Partnership, said: "It’s right that the Government should put its backing behind the significant economic potential of Forgemasters, which is a bedrock of current defence and future energy technology supply chains.”
The business will continue to operate in commercial markets as well. Mr Bond says the Government wants to see it “thrive” in commercial areas.
The Government said that the eventual aim is to return the business to the private sector.
Mr Bond said: “The intention of the Government longer term will be to return it to the private sector.
“In that sense, having a much more vibrant multi-sector business is going to be more attractive to the commercial sector when we come out of the other end of this.
“We’re probably a number of years away from that.”
Action on other steel plants needed
The leader of Sheffield City Council called the nationalisation a “positive move for Sheffield Forgemasters and for the city”.
Terry Fox, Leader of Sheffield City Council, said: “It’s without doubt a positive move for Sheffield Forgemasters and for the city.
“Sheffield Forgemasters is a massive player in this industry and it’s right that the Government is recognising its importance nationally and the need for significant investment.
“We’ve got world-leading expertise right here in Sheffield – we’ve got steel running through our veins.”
However, both he and Dan Jarvis, the mayor for the Sheffield City Region, called on the Government to address the Liberty Steel crisis.
Mr Jarvis said: “While today’s announcement is most welcome, ministers also need to attend to the future of two of our other steel plants which hang in the balance, as a result of the crisis at Liberty Steel.
“The facilities at Stocksbridge and Rotherham have enormous potential, and I will continue to fight for the South Yorkshire steel industry and work to protect all the jobs and businesses they support.”
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