Greg Clark, the business secretary, has agreed to provide £100m in funding to the UK’s second-biggest steel producer after it requested emergency support to make a repayment to an EU-run environment scheme. Sky News has learnt that Mr Clark will announce on Wednesday that the government has stepped in to meet a financial shortfall faced by British Steel ahead of a deadline for the company to pay its latest carbon emissions bill. Sources said that the government funding had been used to acquire carbon credits on behalf of British Steel before surrendering them to regulators, with the company signing a deal with Mr Clark's department to repay the money on commercial terms over the coming months. Mr Clark is expected to make a statement in the House of Commons confirming the government's financial support for British Steel, which owns the giant Scunthorpe steel plant and employs 5,000 people. The disclosure will come just over a fortnight after Sky News revealed British Steel's secret request for a Whitehall loan. Its need for new funding has arisen partly because the impasse over Brexit has left UK-based companies frozen out of the latest version of the EU's carbon emissions trading system (ETS). Ministers had drafted in professional services firm KPMG to advise them on the discussions, which are understood to have concluded that there are no state aid complications because British Steel will be obliged to repay the funding with commercial rates of interest. Nevertheless, the Department for Business, Energy and Industrial Strategy will face scrutiny of its decision given the sensitivity of effectively handing a publicly funded subsidy to a private company. Lenders to British Steel have also been closely involved in the discussions in the last few weeks. Officials in Brussels are said to have assured the government that the Brexit delay until 31 October will not entail a permanent exclusion for British companies from the ETS. Under the scheme, industrial polluters - which should have been awarded their permits last month - can use their allocation to pay for their previous year's‎ emissions. The freezing out of British companies from this year's EU ETS allocation covers more than £2bn of emissions allowances, equating to 100m tonnes of carbon credits - with British Steel accounting for roughly 5% of the total.‎ However, British Steel has already utilised last year's permits to fund working capital requirements, leaving it unable to pay for the current round of carbon credits. Owned by private investment firm Greybull Capital, British Steel has been revived from the brink of closure since it was acquired from the Indian giant Tata Steel in 2016. The company broke even in its ‎first year after Greybull's takeover and has reported positive earnings before interest, tax, depreciation and amortisation in each of the last three years. Greybull is being advised by PricewaterhouseCoopers (PwC) on its search for new funding, while EY, another of the big four accounting firms, is advising the company's lenders, which include PNC and ABN Amro. In addition to the 5,000 people it employs directly, British Steel's supply chain is responsible for a further 20,000 jobs. The company is the largest supplier of steel rails to Network Rail and its French counterpart, SNCF. It produces 2.8 million tonnes of steel annually, meaning it ranks second in size behind Tata Steel, the owner of the vast Port Talbot steelworks in Wales. The company's turnaround programme under Greybull's ownership has involved cost reductions, more than £150m of investment in plant and machinery and a series of overseas acquisitions. Earlier this month, the company promoted Gerald Reichmann, its chief financial officer, to chief executive. Mr Reichmann said in February that British Steel had "robust plans in place to deal with the various Brexit scenarios including the change in carbon credit regime". British Steel exports much of what it produces to Europe, meaning that Brexit-related issues have posed an increasingly pressing headache for the company‎ and its controlling shareholder. Last month, the BEIS select committee accused ministers of neglecting the steel industry by failing to unveil a sector deal as part of the government's industrial strategy. The funding squeeze at British Steel is the latest problem to affect an embattled manufacturing sector in recent months. Much of the focus has been on the automotive sector, with job cuts at Ford and a decision by Nissan to abandon plans to build its X-Trail SUV in Sunderland. In February, Honda confirmed the closure of its Swindon plant in 2021, putting more than 2000 jobs under threat. Greybull‎ has a history of investing in troubled companies, including the airline Monarch, which collapsed in 2017. A spokesman for British Steel declined to expand on a statement issued earlier this month, which said: "Brexit is presenting a range of challenges to every British company and we are not immune. "We are discussing the impact of Brexit on our business with ministers and officials from the Department for Business, Energy and Industrial Strategy and they have been extremely responsive and supportive to date." Greybull and BEIS declined to comment.
The UK government is to lend EU £100m ($131m) to help it repay an British Steel carbon emissions bill. The loan will be repaid on commercial terms. UK companies have been locked out of the latest British Steel carbon emissions trading system because of the Brexit deadlock, leaving EU without permits to pay for last year's emissions. Business Secretary Greg Clark is expected to confirm the government's intervention in a House of Commons statement.