Statement on Allied Steel and Wire

It is my sad duty this morning to make a statement on yesterday’s distressing announcement that ASW, the UK’s second largest steel producer, has gone into administrative receivership.  The Assembly is well aware of the turbulent times that have beset the steel industry over the last few years, but this announcement involving 1200 jobs in Cardiff and Sheerness on top of the recent Corus closures is yet another major blow to what is still Wales’ leading export sector.  In essence, ASW Holdings has, over the last few months, suffered severe cash flow pressures and, following the breach of covenants, the company's financiers have now had to withdraw their support forcing the company into administrative receivership.

I can assure you that the Welsh Assembly Government has not been standing idly by. We have been actively exploring with the company for some time ways in which we could help. Following extensive ministerial discussions with the company bankers on Friday, on Monday I jointly chaired, with Alan Johnson, the Industry Minister at the Department of Trade and Industry (DTI), a nine-hour meeting in London with the company, its bankers, credit insurers and potential investors. This focused on seeing whether the financiers were willing to give the company more time so that the trade investor could continue with its due diligence checks.  There have been extensive discussions between ASW, its financiers and Ministers since the meeting but, unfortunately, the company’s financiers were not prepared to support the company further and the ASW Holdings Board had no choice but to put the company into administrative receivership.

Despite the current difficulties, with appropriate financing, the company's prospects were sound. Over the last few years, ASW -with great efforts from its workforce - has been improving its efficiency. It has 50% of the buoyant UK market for reinforcing bar for the construction industry and had recently introduced acceptable price increases.  However, problems with the credit rating of the company and rises in the world price of ferrous scrap, the company's main raw material, led to cash flow pressures and an increasing dependence on the goodwill of the company’s financiers.  

Clearly, against the background of advanced negotiations with a potential investor, the receiver from KPMG will be looking hard to sell the business as an operating concern. The Welsh Assembly Government and its agents will be doing whatever we can to help find the right buyer. As I reported to EDC yesterday, I have already  spoken to the receiver and offered our full support.  Unfortunately, it appears that the EC steel state aid code, even in its new form, will not allow us to provide any financial assistance towards operations or recovery.

Naturally, the Welsh Assembly Government, along with its Team Wales partners, stands ready to do all it can to assist those affected by the announcement, including suppliers and contractors. The relative buoyancy of the Cardiff economy means that Cardiff may well be in a better position to absorb this blow than some parts of Wales, but this is not to minimise  the potentially serious impact in wards such as Splott and other areas in South Cardiff.

The Assembly Government will not be deterred from its ambitious economic strategy for Wales. The economy, despite these setbacks, continues to grow. Our large companies remain important but above all we must help create an environment in which innovation and entrepreneurship flourish.  That is why I am announcing today major Welsh Assembly Government initiative to ensure we have a first rate broadband telecommunications infrastructure which is widely used by individuals, the public sector and companies of all sizes throughout Wales.

Everyone here knows that no Government can ever prevent distressing announcements regarding companies going into receivership. What we can do is continue to focus on establishing a more innovative, entrepreneurial and thriving economy which will make us much better able to absorb such blows. As I said, we will also provide every assistance and support to all those affected by this announcement. And I am grateful for the acknowledgement from the Company of the huge efforts the Welsh Assembly Government, DTI and Wales Office have put in in an attempt to avoid this situation.  From the outset, the Assembly Government has made it absolutely clear to ASW that it would do all it possibly could to assist. This is just what we have done. We will continue to do so in the coming weeks.