Accountants helping to run struggling British Steel run up £13m fees, judge told
Three senior staff at accountancy firm Ernst and Young were made ‘special managers’ after the company went into liquidation.
Accountants appointed to help run British Steel after the company went into liquidation earlier this summer have run up fees of more than £13 million, a judge in a specialist court has been told.
Judge Sally Barber on Monday heard that three senior staff at accountancy firm Ernst and Young had “incurred time costs” after being made “special managers” by a High Court judge in May and asked to help an Official Receiver manage British Steel’s affairs.
She agreed they should be remunerated and approved the initial payment of £9.2 million – 70% of a total figure, including tax, of £13.1 million – at a hearing in the Insolvency and Companies Court in London.
Further issues relating to the special managers’ fees are expected to be discussed at a follow-up hearing in December.
Monday’s hearing was staged days after the investment division of Turkey’s armed forces pension fund was named as the preferred bidder for British Steel, which employs 4,000 at its plant in Scunthorpe, Lincolnshire, and 700 on Teesside.
Officials at the Government’s Insolvency Service have said that investment vehicle Ataer Holding will be given several weeks to allow its advisers to comb through British Steel’s business before any deal is finalised.
☎️ Positive conference call with the Secretary of State for Business and the British Steel Support Group just now...Posted by Anna Turley MP for Redcar on Monday, August 19, 2019
A union leader said the “overwhelming feeling” among British Steel workers was “one of relief”.
Lawyers representing the three special managers had made a “remuneration” application to Judge Barber.
Barrister Adam Al-Attar outlined detail and said between May 22 and July 12 special managers had “incurred time costs” of about £13.1 million – a figure which included about £2.1 million VAT.
He said the work being done was “complex and time-intensive”.
Mr Al-Attar said Ernst and Young had initially engaged 89 people involved full-time. That number had subsequently fallen to 56.
The substantial remuneration is an operating cost of a very substantial turnover Barrister Adam Al-Attar
He said the Official Receiver had “oversight” of the work done by the special managers and thought what they were charging reasonable.
Mr Al-Attar said it was “unreasonable” to require the special managers to provide their services “on credit” for an extended period.
He said Mr Justice Snowden had ordered the appointment of the three special managers on May 22 after British Steel went into compulsory liquidation.
Mr Al-Attar said the special managers had been asked to help the Official Receiver with the “conduct of the affairs of the company and liquidation”.
“The company continues to trade and, parallel to that ongoing business, there is an expedited sale process in relation to the business and assets of the company,” he told Judge Barber.
“The work is complex and time-intensive.”
He said British Steel had a turnover of £1.2 billion, and thousands of workers were still employed, and said sales since the company went into liquidation were more than £290 million.
Mr Al-Attar indicated that the special managers’ remuneration would come out of British Steel’s coffers, explaining: “In this case, the substantial remuneration is an operating cost of a very substantial turnover.”