Steel firm warns of weakness in UK’s recovery

Barrett Steel said the market remained “very weak” and producers had been hasty in spotting a bounceback in demand last year.

The Bradford-based firm saw its own fortunes improve in 2010, however, as it swung back into the black after going on a cost-cutting drive. It is also increasing its presence in global markets.

Barrett, which dates from 1867, holds more than 80,000 tonnes of steel and other products and is believed to be the nation’s largest independent steel stockholder.

It moved from a £6.44m loss to an £8.1m profit last year but warned of the effect of the effect of the construction industry slump, which has already claimed the scalp of Rok, the self-styled “nation’s local builder”, and seen the total volume of structural steel supplied to the UK construction industry fall by an estimated 50 per cent.

The performance of Barrett improved after directors led a two-year cost-cutting drive but they warn of the continued effect of the construction market, which has historically provided a “significant” part of its work.

Chairman Roy Butcher said: “This market is and remains weak.”

Barrett saw sales for the year to September 30 dip to £197.12m, compared to £200.52m the previous year. It made a pre-tax profit of £8.1m, compared to a £6.44m loss and an operating profit of £9.26m, compared to a £4.82m loss in 2009, when exceptional items hit £10m because of write-downs in stock value and redundancy costs.

Earlier this year it opened a factory in Houston, Texas, to serve the oil and gas industry in the Gulf of Mexico and Brazil.

It has also continued to invest elsewhere and last year spent £3.1m on its plant and equipment as well as buying freehold premises in Sheffield and Montrose on the east coast of Scotland.

This summer it has increased capacity and reduced lead times at its Rotherham plant after investing £500,000 upgrading the cutting operations at its C Roberts facility. Its new plasma drill processor is suitable for the manufacture of bridges, agricultural machinery, mining equipment and other heavy structural steel operations.

Barrett, which declined to comment, has worked on a series of high-profile contracts recently including the pit lane grandstand at Silverstone, The Mary Rose Museum, Portsmouth and a distribution warehouse in Bradford for Marks & Spencer.

In a gloomy conclusion to his statement, Mr Butcher said: “In the forseeable future we can see no change in the fundamentals of this (construction) market to suggest anything like a return to the high levels of activity and prices of 2008. On the contrary we believe that producers misread the increased demand in the spring and early summer of 2010. On the back of a very modest increase in demand and a level of restocking, producers assumed a significant recovery.

“During the autumn and in the run into 2011 demand has fallen back to levels of early 2010 and both producers and competitors are suffering reduced prices in an attempt to capture limited volumes in a very weak market.

“In recent months there have been notable failures in the construction fabrication market. We fear there will be more but will maintain our vigilance in relation to potential bad debt risks.”

Demand in its engineering markets has been maintained and this is expected to provide a balance to trading elsewhere, Mr Butcher added.

It has also had “one of its best years” on limiting bad debts and is investing in energy efficient equipment, such as improved lighting.

BEDROCK OF COMMUNITY

Barrett Steel was set up in 1867, when Henry Barrett decided that the future lay in the steel industry.

He left his job at an iron stockholder to set up a steel stockholding firm. The company proved to be a resounding success and became a bedrock of the local business community.

James Barrett, one of the directors, is the great, great grandson of Henry Barrett. He and the management team are the current owners of the group, which is made up of 47 companies operating from 25 bases across the UK.

Four years ago the family sold Barrett Steel Buildings to its management.