Prince Andrew revelations put coalition's 'bad decision' to cancel Sheffield Forgemasters £80m loan back into spotlight

Forgemasters, which was taken over by the Ministry of Defence in 2021, is currently pursuing a separate expansion plan with a £1.3bn price tag.

The 2010 project was cancelled as a result of the loan being pulled by the incoming coalition government - but more than a decade later the Government is seeking to build a series of small modular reactors (SMR), which are scaled-down nuclear power stations, to meet the nation’s energy needs.

Earlier this year, Labour peer Lord Spellar asked what discussions have taken place about Forgemasters having a role in the SMR programme.

Energy security minister Lord Vallance replied: “While it would not be appropriate to speculate at this time on specific commercial contracts, Great British Energy – Nuclear’s ambition is for 70 per cent British built products across the small modular reactor fleet, including both on-site and off-site activity.

“The Department for Energy Security and Net Zero has regular dialogue with the Ministry of Defence on a range of policy matters, including increased collaboration and alignment between civil and defence nuclear capabilities to maximise associated benefits. These include driving economic growth, boosting the role of nuclear energy and developing innovative nuclear technologies.”

Forgemasters, which was taken over by the Ministry of Defence in 2021, saw its recapitalisation programme increased from £900m to £1.3bn last year.

It is currently in the process of expansion work including the building of a 30,000 m2 machining hall and a new 13,000 tonne forging line to support manufacture for the UK’s defence programmes.

Former Business Secretary Sir Vince Cable has previously admitted to The Yorkshire Post the loan cancellation was a “bad decision”, with ex-Sheffield Forgemasters boss Graham Honeyman and former local MP Richard Caborn now also decrying what happened.

The coalition government cut the loan as part of austerity measures after taking over from Labour, which had previously approved the spending.

Sir Vince said he had asked officials for recommendations for cuts, with Forgemasters put on the list. He said there had been “strong disagreement” among officials about the cancellation but the view it was “poor value for money” ultimately prevailed.

He said: “In retrospect I was given bad advice and made a bad decision. The company was crucial to the nuclear sector.”

Sir Vince said the decision led to a “vicious campaign” against then Sheffield MP Nick Clegg, who had just become Deputy Prime Minister, and insisted there was “no permanent damage done” as the company received subsequent support.

Mr Honeyman, who led Forgemasters from 2002 to 2018, agreed “with some justification” that cancelling the loan was a bad decision.

“We wanted this investment because we wanted to build all the components for a civil nuclear power station and the press wasn’t big enough for that.

“Since then, MoD are investing a lot of money in Forgemasters, including a nearly-new press, so they will be able to make all this stuff.

“It has taken a long time for them to come to this decision.”

Former Sheffield MP Richard Caborn said there had been a hard-fought campaign to secure the loan agreement and it was a bitter disappointment when it was cancelled.

He said the decision was about much more than just a single project.

“This was our argument with Nick Clegg at the time. They weren’t just ditching the loan, they were ditching the industrial strategy.

“The reality is now it has come back to exactly that investment. £1.3bn is going into the new forge, a 13,000 tonne forging press and a new machine shop. It is 16 years down the road.

“At a crucial time, on the altar of austerity they cut back investment which would have been huge for our area. The coalition pulled the plug. It was done within a matter of weeks, they didn’t hang around and it was Goodnight Vienna.”