Article

British Steel: supply chain left in limbo

For any company in the supply chain concerned, here are some immediate steps you should consider

The financial issues at British Steel have been making headlines over the past week. The uncertain future of the manufacturer has led government officials to hold meetings to devise a potential rescue plan for the company.

On Thursday, the government announced it was giving British Steel a £75 million bailout (now reduced to £30 million) so the business could carry on trading. But in the process, businesses in British Steel’s supply chain have been left in limbo due to the uncertainty of the manufacturer’s future.

For any company in the supply chain concerned, here are some immediate steps you should consider:

Do you hold any British Steel assets?

Consider claiming an equitable lien over goods in your custody in respect of payments due to you. Speak to your solicitors to review your terms and conditions and notify British Steel of your claim. You should make this claim prior to administration (on the assumption the company does go into administration) as the appointment of administrators creates a moratorium on such action being taken.

It is important for to speak to your credit insurer prior to taking the above actions to ensure they do not affect your cover.

Check your Terms & Conditions

If you’re a supplier of British Steel, check the terms and conditions of any contract you have with them. It is important to establish whether you are working under your own terms or those of British Steel. Once established, your rights to recover goods in lieu of payment under your Retention of Title provisions should be considered. Clear identification of stock supplied by your business is essential. ROT claims, where valid, can be pursued following administration.

Plan for the worst-case scenario

While it’s impossible to say exactly what will happen to British Steel at this stage, it’s worth preparing your business now for the worst-case scenario. That means looking at your finances and assessing what they would look like if the sales to British Steel stopped and outstanding invoices went unpaid. Complete a review of your own debtor’s ledger; are any of your customers also suppliers to British Steel and how might the collapse of British Steel affect their business?

Once you have a clearer picture of what this could look like, you can then take steps to plan for any outcome, such as identifying where you can make any necessary cost savings and put in place appropriate contingency plans.

It is always difficult knowing when a business should take the above steps which can affect their relationship with a customer or successor business.

If unsure, seek advice

When a major company like British Steel is declared insolvent, it can cause huge ripples throughout the supply chain, therefore it’s vital that suppliers and customers of the manufacturer do all they can to prepare for the eventualities.

If you need any help or advice, please contact me on martyn.pullin@frpadvisory.com

Related team

Martyn Pullin

Martyn Pullin

  • Partner
  • Restructuring Advisory
  • Teesside