British Steel auditor Mazars resigns over fee disagreement

British Steel’s auditor has resigned over a disagreement over its fee to audit the company’s last financial statements, heaping further pressure on Britain’s struggling second-largest steelmaker.

Mazars handed in its resignation at the end of July, after British Steel refused to agree to a proposed “minimum fee” that its auditor believed was necessary to check the 2021 accounts “to an acceptable level of audit quality” given the “complexity, risk and control environment” of the business.

British Steel, which owns the Scunthorpe steelworks in Lincolnshire, had to date also not agreed to pay “requested overruns for delays and audit issues arising during the prior year audit”, according to filings by Mazars at Companies House published this week.

The resignation comes as British Steel remains in talks with ministers over a support package of up to £500mn to keep its operations viable.

Jingye, which bought British Steel out of insolvency in 2020, told ministers last month that the company was losing about £1mn a day. It has asked for an estimated £400mn to £500mn of support, including about £100mn to offset the soaring cost of carbon permits. UK representatives of British Steel have twice met business secretary Jacob Rees-Mogg to discuss the need for aid.

British Steel employs about 4,000 people, most of them at the energy-intensive blast furnace works at Scunthorpe. Thousands more jobs in the supply chain are also dependent on the company.

The company’s latest audited financial accounts to the end of December 2020 revealed it had fallen to an operating loss before exceptional items of £140mn. Profitability was hit by a drop in demand from automotive customers during the Covid-19 pandemic. Profit after tax and exceptional items for the year was £295mn. It made revenues of £844mn during the year.

The accounts also showed that Jingye lent its British subsidiary £220mn to run its day-to-day operations.

Britain’s steelmakers have faced a perfect storm of soaring energy prices and rising inflation as well as softening demand because of the wider economic downturn. The business department said last month that the government was “working at pace with the company to understand the best way forward as it seeks to secure a more sustainable future”.

British Steel declined to comment on Mazars’ resignation but said that “following a tendering exercise, we have appointed another firm to act as our auditors”.