What's going on?
British Steel asked the UK government for another emergency loan on Tuesday – but a breakdown in talks ended in the country’s second-biggest steelmaker collapsing into insolvency on Wednesday.
What does this mean?
British Steel says Brexit is partly to blame: orders from European customers have rusted up in the face of uncertainty, and the falling value of the pound since the Brexit referendum has made raw materials from overseas more expensive.
With the company now bankrupt, 25,000 British jobs are at risk. British Steel may no longer be commercially competitive: China has produced more steel in the past two years than the UK has ever (tweet this). The UK government had already forged British Steel a separate $153 million emergency loan just three weeks ago to cover a Brexit-related emissions bill.
Why should I care?
For markets: Even steel can’t withstand politics.
The impact of political decisions on business goes beyond just stock prices. British Steel is a private company without public shareholders to appease, but Brexit has still hit it hard. In the US, meanwhile, 173 footwear companies including Nike, Adidas, and Under Armour are trying to steal a march on politics, penning an open letter to the president on Monday urging him to reconsider further increasing tariffs on Chinese-made goods. The footwear firms (which already pay among the highest duties in the US) warned that higher tariffs could be catastrophic for the industry – and for American tootsies.
Zooming out: From steelmakers to steel users.
Auto firms around the world are stalling: weak consumer spending has hit sales in the US, tariffs have aggravated slowing demand in China, and European automakers are getting caught in the trade war crossfire. On Monday, Ford followed a round of European job cuts in January with 7,000 more, this time targeting white-collar workers. And Tesla’s stock fell on Monday after an influential analyst flagged the checkered chances of the electric automaker hitting its 2019 profit targets.