British Steel seeks rate cuts

Sir Brian Moffat, chairman of British Steel, yesterday urged further cuts in interest rates to bring sterling down to a more competitive level and help restore profitability.

At the company's final annual meeting before the merger with Dutch steel group Hoogovens - to form, initially, BSKH - Sir Brian said British Steel was still losing money because of the pound's strength.

He told shareholders that steel demand was generally firm around the world, with some Asian economies showing encouraging signs of recovery from the low point of early 1999.

The company, he said, was pursuing cost reductions by shedding labour and improving efficiency, with further significant benefits due. British Steel is "delayering" thousands of middle managers and retraining production staff to take on their tasks.

"Unfortunately despite these initiatives and some increases in selling prices, the group continues to incur losses - albeit at lower levels than the final quarter of last year - due to the impact of the strength of sterling, particularly against the euro," he said.

In the year to April 3 BS lost £142m, compared with a profit of £316m the previous year, and analysts warn of further losses this year. Sir Brian, a critic of the overvalued pound, said the recent rate cuts were welcome "but we believe more still needs to be done to bring sterling back to a more competitive level".

Sir Brian coupled this with a warning that the treasury's proposed climate change levy could cost the group £100m and industry thousands of jobs.

Brushing aside reassurances from ministers that heavy energy users such as BS would win up to 50% rebates, Sir Brian said this could be worth as little as £5m to British Steel.

"This puts British Steel and other high energy users at a disadvantage over other industries such as banking, which is a low consumer of energy," he said.

Ministers are offering to use the £1.7bn which could be raised by the levy to finance a half-point cut in employers' national insurance contributions, arguing that this will help boost employment.

But Sir Brian said: "An unfair and onerous tax would put at risk UK jobs - something which British Steel, and I believe the government, would not wish to see happen."