Confirmation that the new High Speed 2 railway line will go ahead could help secure the sale of British Steel, industry experts say.
The Government has given the green light for stretches of the £100 billion-plus HS2 project from London to Birmingham and from the West Midlands to Crewe, although sections from Crewe to Manchester and Birmingham to Yorkshire will be reviewed to check value for money.
It comes after the Jingye Group reached a preliminary agreement to take over the Scunthorpe-headquartered business, which is an internationally renowned rail specialist, producing track laid globally.
As negotiations aimed at finalising the deal continue, the HS2 announcement has been welcomed by the industry, with talk of it helping bring the British Steel buyout to a successful conclusion.
And after a question in Parliament from Scunthorpe MP Holly Mumby-Croft, Prime Minister Boris Johnson said the Government would do its “utmost” to ensure British Steel is used for major rail projects in the future.
The company is currently responsible for 95 per cent of Network Rail track, with the relationship so vital it had tabled an “insurance bid” for specific assets when British Steel was placed into compulsory liquidation last May, should it have been split up.
It signed a five year contract in late 2018 for 200,000 tonnes – or 4,000km – of rail, building on the 9,000 km supplied prior to the new deal.
The issue of the potential collapse of British Steel, with the Official Receiver and special managers overseeing continuing operations, was one of the first items brought up in Westminster when Prime Minister Boris Johnson was sworn in. Prior to debts of £880 million being revealed at a High Court hearing, investment had been pumped into rail infrastructure, allowing the North Lincolnshire site to produce longer track.
Now observers believe today’s announcement, from Mr Johnson, may help get the deal over the line, with the project a huge opportunity alongside existing contracts, notably in Northern Ireland, Belgium, Italy and Singapore.
Dr Jonathan Owens, a logistics expert from the University of Salford Business School, said: “HS2 needs about 170 tonnes of long product rail and switch, which can be made in Scunthorpe. Therefore, it would make sense for this to be the plant to be the main supplier for the project.
“Buying raw material from overseas is a waste of time, money and effort, as well as increasing the supply chain cost by up to 30 per cent.
“Currently Jingye is stalling on the deal the negotiated in November last year. However, now that HS2 is confirmed, perhaps the deal looks more appealing.
“HS2 is a huge investment for the UK and keeping the investment within the UK’s supply chain as much as possible is important.”
In a question to Mr Johnson in the House of Commons, Mrs Mumby-Croft said: “Historically, Scunthorpe steel has been used for many national infrastructure projects such as the HMS Queen Elizabeth II aircraft carrier. Does he agree with me that we should be using our world class steel such as the steel we produce in Scunthorpe for projects such as this?”
In response, Mr Johnson said: “I pay tribute to the workers of British Steel and what they do. Most of our train tracks come from British Steel, whether in Scunthorpe or elsewhere and we will do our utmost, not withstanding the difficulties that plant currently faces, to ensure that remains the case in the future.”
Industry lobby group UK Steel’s director general Gareth Stace said: “We welcome the Government’s decision to press ahead with HS2 in full, and today we are calling on the Government to ensure that the benefits of this multi-billion pound project are felt in all four corners of the United Kingdom, by maximising the opportunities to use high-quality UK steel products.
“It is estimated that HS2 will use two million tonnes of steel over the next 10 years and the UK’s steel producers stand ready to supply the steel for the new track, rolling stock, tunnels, bridges and much more besides.
“The use of UK-made steel for HS2 would support over 2,000 jobs and deliver £1.5 billion to the UK economy – ensuring the benefits of this project are not just felt along the route, but in steel communities across the UK.
“Last May, the steel industry, with BEIS support, launched the UK Steel Charter, a new initiative that will drive-up the use of UK produced steel in public projects. We firmly believe that where projects are paid for from the public purse, there is a duty to maximise the benefits to the UK in terms of jobs, skills and economic growth and the use of UK steel will do just this.
“We now call on HS2 and the Transport department to sign up to the charter and ensure that this multi-billion pound project benefits steel communities across the UK.”
It is understand final consents for the Jingye deal for British Steel are being secured, with a potential issue being the rolling mill in Hayange, France, and French authorities’ blessing on the transfer.
Jingye has yet to clarify the situation, having won unions over with an agreement over an employment package just before the Chinese New Year.
Hannah Vickers, chief executive of the Association for Consultancy and Engineering, a group representing companies which design, deliver and operate our national infrastructure, said: “While HS2 provides plenty of lessons in how we plan, execute and communicate major infrastructure projects in the UK, today all in the industry will be delighted to have seen common sense finally prevail.
“This is great news for people across the Midlands and the north who will benefit from an economic boost by being better connected. Thanks to capacity being opened up across the network, projects like Midlands Rail and Northern Powerhouse Rail can become a reality. Finally, quicker links will encourage people off cars and planes, vital if society is to meet its Net Zero targets.
“There has been enough discussion and delay. HS2 was first announced nearly a decade ago. We need to stop talking and get on with building the future.”
Source: Grimsby Telegraph