Mark Kleinman: Out of the frying pan and into the furnace for UK steel
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly City PM column
Out of the frying pan and into the furnace for UK steel
Death knells and the British steel industry have made uncomfortably common bedfellows in recent years. All three of the country’s biggest steelworks – including Tata Steel’s at Port Talbot in Wales and British Steel’s Scunthorpe site – have faced outright closure on multiple occasions, only to be granted reprieves thanks to a combination of government aid and foreign investors.
The sense of déjà vu in Whitehall must, then, be palpable. Tata Steel’s £500m taxpayer grant to build an electric arc furnace which should be operational by 2027 is the least of the government’s steel sector challenges – even though the optics of doling out public money to expedite the loss of thousands of jobs were awful.
As I reported on Sky News last weekend, ministers are now on the verge of drafting in bankers to help them wrestle with the perennial conundrum of Britain’s steelmaking future.
The need for a solution, at a time of constrained public finances, is urgent. British Steel, the second-largest player, is already under government control (though not ownership) after ministers seized the management of it from China’s Jingye Group earlier this year. Running its Scunthorpe blast furnaces since has already cost taxpayers more than £230m.
Smaller rival Speciality Steels UK, part of Sanjeev Gupta’s Liberty Steel, is also effectively in public hands, having collapsed into compulsory liquidation in the summer.
Trade headwinds and a global glut of the metal mean these businesses have few long-term prospects as standalone enterprises. Some form of combination needs to be explored, which presumably is where Evercore comes in.
A spokesperson for the Department for Business and Trade (DBT) said: “This government sees a bright and sustainable future for steelmaking in the UK, and we’ll set out our long-term vision for the sector in our upcoming Steel Strategy.”
When that document is published in the coming weeks, it will inevitably adopt a glass half-full approach to an industry which has consumed billions of pounds of public subsidy in recent years. With little sign that macroeconomic factors will enable that to change, expect Whitehall’s sense of déjà vu over the future of British steel to persist.
HSBC, aka Heavyweight Succession and Boardroom Chaos
Hongkong and Shanghai Banking Corporation? Nope – this week’s acronym for Europe’s biggest lender must surely be Heavyweight Succession and Boardroom Chaos. No, me neither.
There’s no other way to describe the fact that after a year of searching, HSBC has picked as its next chairman a 76 year-old existing non-executive director who had previously indicated he didn’t want the job.
There are myriad reasons to believe that Brendan Nelson is simultaneously competent enough to do the job, and yet the wrong choice for it. Investors would be right to be alarmed about the recruitment process, and its outcome, given the need for a genuinely independent chair amid HSBC’s many unanswered strategic challenges.
On Monday, the remaining external candidates were invited to pitch to HSBC’s board, with former chancellor George Osborne and Kevin Sneader, the former McKinsey chief who now works for Goldman Sachs in Asia, taking part in an uncommon boardroom bake-off.
That sort of session would typically be reserved for executives, as opposed to chair contenders, but the selection of Nelson merely serves to underline what a mess this process has been.
That commonly held conclusion risks throwing a harsher light on the person responsible for orchestrating these proceedings: senior independent director, Ann Godbehere.
It would be hard to find a more experienced City figure than Godbehere, whose CV includes stints as a director of no fewer than British American Tobacco, Northern Rock, Prudential, Rio Tinto, Shell, Stellantis and Swiss Re.
One cannot, therefore, accuse her of lacking boardroom experience, but she should not remain at HSBC for much longer. If nothing else though, the bank’s announcement yesterday that Nelson’s appointment came after “a robust process” should at least win the award for corporate euphemism of the year.
New Premier Miton chair signals shake-up
It’s also all change at the top of Britain’s mid-market asset management groups. Last week, Jupiter Fund Management named Nathan Bostock, the former Santander UK chief executive, as its next chairman.
Today, it’s Premier Miton’s turn for a changing of the guard: as I reported on Sky News yesterday, the AIM-listed company will name former Credit Suisse and Perella Weinberg Partners banker Christopher Williams as chairman Robert Colthorpe’s successor.
Premier Miton, which is run by chief executive Mike O’Shea, is a relative minnow of the industry, with just over £10bn in assets under management.
That makes it imperative for it to have a weather eye on consolidation options in an industry constantly striving for cost-saving opportunities and where long-term structural trends are responsible for persistent outflows from small and mid-cap fund managers.
Premier Miton’s market update last month offered a prime example of this: net quarterly outflows of £191m and the identification of £2m of further annualised savings to offer investors some reassurance.
Nevertheless, the need to consolidate remains; I’m told the other leading candidate for the chairmanship was Euan Munro, former boss of Aviva Investors and Newton Investment Management and a blue-chip figure in the City. With Williams’s arrival, it’s safe to say that a major deal of some kind for Premier Miton looks inevitable.