British Steel, a Chinese-owned company, has been shocked by the resignation of its auditor. The new auditor was unable verify stock worth tens and millions of pounds.
Moore Kingston Smith, who audited the finances of British Steel for just a year, has quit. This is a blow to British Steel’s hopes to unlock £600 million in state aids to prevent collapse.
This follows the departure of a fellow accounting firm Mazars a little over a year earlier. After a dispute over fees, it resigned from its position as British Steel’s audit firm.
Moore Kingston Smith stated that it was unable to satisfy itself with the £45.8million inventory amount. The company expressed concern over the severely delayed accounts of the year ending in December 2021.
The auditor flagged “material uncertainty” about British Steel’s continued trading as a continuing concern because the company may soon run out cash without Beijing’s support.
British Steel admitted in its accounts to having “no legally-binding agreements in place” in relation the remittances of additional funds from Chinese owners Jingye, or any other third party as at November 21st 2023 – the date the financial statements signed. This disclosure was made despite Jingye injecting £100m of equity funding in the business just eight days prior, according to filings.
British Steel’s 4,500-strong workforce, of which 3,000 are employed at the 19th century blast furnace works located in Scunthorpe, will be thrown into further misery by these uncertainties. The revelations today come only hours after South Wales’ rival Tata Steel announced the closure of its blast furnace production.
British Steel has hired a larger firm to audit its accounts, according to sources close to the company.
British Steel went bankrupt in 2019 when talks between the government, its private equity investors and British Steel fell apart. Jingye saved the business in 2020 by promising to inject hundreds of millions to revive the fortunes at the Scunthorpe Works.
British Steel, like Tata is also planning to switch over to EAF production. Jingye is asking for £600 million from the UK taxpayer to help fund this switch, as part of its £1.3 billion turnaround strategy. The unions claim that 2,000 jobs will be at risk.
British Steel’s failure to submit accounts has been cited as a major obstacle to unlocking funds from Westminster. Civil servants are also likely to view the auditor qualification negatively.
British Steel has hired a larger firm to audit its financial statements, according to sources close to the company. The financial statements for the fiscal year ending in December 2022, which were supposed to be submitted by September of last year, are still pending. Last week, the December 2021 accounts have been filed with Companies House.
A spokesperson for the company stated: “Our parent has provided British Steel with a letter of support to ensure our continued existence.” They are not legally binding by nature, but our shareholder continues providing all the necessary financial support in order to ensure stable trading and strategic investment.
British Steel announced that it has received approval to spend £76million on new equipment over the next few months.
“Jingye is committed to investing for the future of British Steel, as we move to net zero. They will continue to support us in this transformation.” This support is not limited to the recent equity injection. We continue to work with the UK Government on our strategic plans.