2
BUSINESS
Plans for taxpayer to step in if
Gupta steelworks are wound up
The taxpayer could step in to
keep the lights on at Sanjeev
Gupta’s Liberty Steel
businesses under options
being considered by civil
servants in the wake of a
winding-up petition by HM
Revenue & Customs.
HMRC filed petitions to
wind up four of Liberty’s
businesses in the High Court
last week over a tax debt of
£26 million, jeopardising
more than 2,000 jobs in the
north of England and the
Midlands.
Liberty Steel has been
racing to restructure its
finances after being hit by the
collapse last year of its main
lender, Greensill Capital, as
well as by soaring energy
prices and Covid disruption.
Civil servants are meeting
this week to discuss
contingency plans in the
event that Gupta is not able tomeet HMRC’s demands and
the businesses are forced into
compulsory liquidation.
It is understood that one
option being considered is for
ministers to grant a taxpayer
indemnity that would keep
the four businesses running
while a buyer is sought.
This method was used
after the collapse of British
Steel in May 2019. Taxpayers
kept its plants running at a
cost of £500 million until it
was bought by Jingye of China
in March 2020. Officials are
understood to be anxious to
safeguard steelmaking jobs
and production at the
affected Liberty sites in Co
Durham, South Yorkshire,
north Lincolnshire and the
West Midlands.
GFG Alliance, parent
company of Liberty, said its
offer to repay £500,000 a
month to HMRC has been
rejected but that it remained
in talks “to reach a resolutionJon Yeomans which would protect
thousands of jobs and
domestic supply chains”. He
added: “GFG’s UK business
are strategic assets for the
country and can have a viable
future. We are working with
all creditors to achieve a
consensual restructuring and
settlement of debt, allowing
recapitalisation of the
companies.”
The department for
business said it was “closely
monitoring” developments at
Liberty Steel and continued
to “engage closely” with it.
“We stand ready to support
their dedicated employees.”
Liberty’s woes come as the
industry grapples with tariffs
placed on steel imports by
the US under Donald Trump.
The US has since unwound
tariffs on European imports
but the charges remain in
place on UK steel. The US and
UK kicked off talks to resolve
the dispute last month.Hi-de-Hi sent up Butlin’sThousands more workers
returned to the office last
week after Boris Johnson
lifted his work-from-home
guidance in January.
Tube stations in London’s
financial districts, such as
Mansion House, Aldgate,
Canary Wharf and Holborn,
registered a 7 per cent week-
on-week rise and a 24 per
cent climb on two weeks
earlier. The increase in
customers took use of the
stations to 51 per cent of the
level before the pandemic.
Springboard, which
measures footfall, calculated
that there were four times as
many employees back in
offices last week than in the
same week in 2021.
Diane Wehrle, insights
director at Springboard, said
the return had also
accelerated in city centres
outside London, with a week-Office workers flock
back to city centres
on-week increase of 1.3 per
cent — larger than its measure
of London office workers,
which rose by 1.1 per cent.
Across London, Tube
journeys were up 4 per cent
week-on-week on Thursday,
reaching 61 per cent of their
pre-pandemic peak,
according to data from
Transport for London.
Use of the Tube was about
60 per cent of pre-Covid
levels during the week — up
from about 45 per cent in
early January, TfL said.
Stations in financial districts,
between 8am and 9am, were
already on track to reaching
double the number of users
when work-from-home
restrictions were in place.
TfL said last week that
since the WFH guidance was
lifted on January 19, the
number of people using the
London Underground on
weekdays had increased by
25 per cent.Hi-de-no: Butlin’s bidders balk
at proposed £700m price tag
Potential bidders for Butlin’s
holiday camps have been
balking at a mooted £700
million price tag.
US private equity giant
Blackstone is selling the
holiday brand, satirised as
Maplins in the 1980s TV series
Hi-de-Hi, as it reshapes its
Bourne Leisure parks arm.
Rothschild, which is
handling the sale for
Blackstone, is said to have
been holding sessions with
potential buyers at its London
HQ in recent weeks. But one
US private equity bidder said
he had been shocked at the
anticipated price for a
business that comprises only
three camps at Minehead,
Skegness and Bognor Regis.
A source said Butlin’s chiefs
have been offering guidance
to bidders that it generates a
£65 million profit and a
£700 million valuation is fair.The source said that
valuation did not factor in
what he estimated to be
£75 million needed for
investment in modernising
the three camps, including
renovating the pavilions at
each property, upgrading
infrastructure and improving
staff accommodation.
In addition, bidders would
have to create a new head
office for bookings, human
resources and other back-Jim Armitage office functions currently
being managed at Bourne
Leisure’s Hemel Hempstead
HQ in Hertfordshire.
Sources at Blackstone,
which bought Bourne Leisure
for £3 billion last year, said
they did not recognise the
Butlin’s numbers.
They explained that there
was no price expectation yet
as the process was still in its
early stages. Butlin’s would
be sold in an auction process,
so the price would be
whatever the bidders were
willing to pay, they said.
Bourne also owns Haven
and Warner Leisure Hotels
and is thought to have had a
lot of interest in potential
bidders for the Butlin’s group.
Investors’ appetites have
been whetted by the surge in
staycations during the Covid
crisis. However, the end of
travel restrictions and the
cost-of-living crisis could
dampen the optimism.Jill Treanorhad audited the company for
20 years before being
replaced by BDO in 2019
under rotation rules. In the
same year, Kier told investors
it had discovered an
accounting error and that itsHOLDING
AUDITORS
TO ACCOUNT
PWC
As PwC faces an investigation into its audits
of two construction giants, Anna Menin
looks at the beancounters behaving badly
6 Big Four accountancy
firms are back in the
spotlight over their audit
departments’ failures to spot
companies going wrong.
Last week, it emerged that
PwC is being investigated by
the Financial Reporting
Council over its audits of two
of Britain’s largest
construction groups, Kier
and Galliford Try.
The FRC ordered Galliford
Try to restate its accounts
two years ago after the
company overstated its
assets by £94.3 million. PwCnet debt was £40 million
higher than previously
stated. PwC has audited the
company, the government’s
largest construction
contractor, since 2014.
However, it is far from the
only auditor in trouble
recently; Deloitte, EY and
KPMG have all come under
scrutiny after high-profile
accounting scandals.
The government launched
a consultation on audit and
corporate governance
reform last year, but is yet to
publish a formal response.BUILDING ON SAND
6 The Kier and Galliford Try probes take
the total number of regulatory inquiries
into PwC audits to seven. The firm,
which audits 104 companies on the
FTSE 350, according to Adviser
Rankings, is also under
investigation by the FRC for
its 2019 audit of Wyelands
Bank. Wyelands, part of
embattled steel magnate
Sanjeev Gupta’s GFG
Alliance, said last
week it had “no
viable future” and
that almost all its
loans were in
default. Thelender is being wound down. PwC quit
as its auditor in late 2019, citing an
undisclosed conflict of interest.
Last month, the FRC extended an
existing investigation into PwC’s audits
of Babcock, after the defence
contractor was forced to take a write-
down of £1.7 billion following a review of
its contracts and balance sheet. Four
years of audits are now being looked
into by the watchdog. The FRC is
also investigating PwC’s
audits of haulier
Eddie Stobart and
BT. PwC is
declining to
comment,Would a windfall
tax work?
It just cannot
be the case
that this
would hit
investment
B
ernard Looney was feeling
confident. After a bumpy
couple of years for BP, he
had some good news to
impart. Oil prices had
rebounded from their Covid-
induced lows and money
was pouring back into its cof-
fers. Presenting BP’s fulsome
third-quarter results last
November, the chief executive remarked
that it was “literally a cash machine”.
Looney may wish he had been more
circumspect. The throwaway comment
has become a stick with which to beat the
industry, emblematic of oil producers
making out like bandits while ordinary
people suffer. Global gas prices are soar-
ing and millions of households face the
prospect of bills rocketing from April,
when the energy price cap goes up.
On the same day that industry regulator
Ofgem announced that the cap would rise
by £693 a year to just shy of £2,000, Shell
said it would buy back $8.5 billion (£6.25
billion) of its own shares and raise its divi-
dend. The optics, as they say, were not
good. Now oil is heading towards $100 a
barrel and the Labour Party is calling for a
windfall tax on oil majors to keep down
energy bills. “North Sea oil and gas pro-
ducers who have made a fortune... should
be asked to contribute,” said Ed Miliband,
the shadow climate secretary.
Calls for a fresh levy may play well with
an electorate crying out for relief from
the cost-of-living crisis. And it would not
be the first time the UK has slapped a
windfall tax on a big industry — even if
such measures have been used sparingly
in the past. But chancellor Rishi Sunak
has indicated his aversion to the idea;
after all, he needs to burnish some low-
tax credentials with his Conservative
backbenchers. In truth, the Tories are no
strangers to a tax raid, yet the question
remains: would a windfall tax on the oil
and gas giants be an effective or desirable
tactic at a time of national turmoil?
The key definition of a windfall tax is
that it should be a one-off. It typically tar-gets an “unearned windfall that has
occurred to somebody not as a result of
their own actions”, said Chris Sanger,
head of tax at the accountancy firm EY.
Oil and gas companies have seen no
change in their costs but a very big
increase in the price of their products —
“for reasons outside their control”, added
George Dibb, head of the Centre for Eco-
nomic Justice at the IPPR think tank. BP’s
windfall was unexpected — because of
very high gas prices.MORAL MAZE
There is also a moral dimension to a wind-
fall tax. Dibb believes a line can be drawn
between large oil and gas profits “and the
fact that wide numbers of the general
public are facing quite severe economic
hardship” because of those same prices.
“That is a fundamental injustice within
our economy and it can be remedied with
a relatively small tax,” Dibb said.
North Sea oil and gas companies
already pay a surcharge on top of corpo-
ration tax, bringing their tax rate to 40
per cent; Labour’s proposal is to lift this to
50 per cent, raising about £1.2 billion. It
would use this, along with a couple of
other measures, to cut VAT on
energy and expand the Warm
Homes Discount, lowering bills
for 9 million households most in need.
Unsurprisingly, the sector is opposed
to a fresh tax, pointing out that surging gas
prices mean that the Treasury will still
rake in £3 billion in extra tax revenue if it
leaves rates alone. A windfall tax would
“send financial shockwaves through the
industry”, trade body Oil & Gas UK
(OGUK) warned; it would discourage firms
from investing in North Sea gas and make
Britain more dependent on imports.
However, there is a precedent for a
moralistic windfall tax, and it comes from
Margaret Thatcher’s first government. In
1981, then-chancellor Geoffrey Howe
imposed a 2.5 per cent levy on bank
deposits to raise about £400m from the
giant profits banks were making through
interest rates as high as 15 per cent. At theThe call has gone up to raid oil and gas profits as crude prices soar and the
cost-of-living crisis bites. But would it do more harm than good, asks Jon Yeomans
£1.2bn
Labour’s windfall tax take50%
Proposed energy firm tax£693
Rise in energy price cap