Liberty Steel has announced plans to cut 440 jobs and suspend manufacturing at its plant in south Wales, in a sign of difficulties in Sanjeev Gupta’s metals empire.

The steelmaker on Thursday said it would turn its Newport manufacturing plant into a distribution centre, make idle a site at nearby Tredegar and another at West Bromwich, in the West Midlands, and cut back production of primary steel and steel products at Rotherham, Yorkshire.

Liberty Steel companies in the UK have been struggling since the collapse of Greensill Capital, which was formerly a financial backer of Gupta’s collection of companies known as Gupta Family Group (GFG). The new restructuring plan is the latest in a series of changes made to try to revive its fortunes.

Gupta’s companies face a string of problems, ranging from the resignation of the auditor of several key companies in September, to an investigation announced in May 2021 by the UK’s Serious Fraud Office into “suspected fraud, fraudulent trading and money laundering”.

Liberty said the cuts would help to save the jobs of another 1,900 permanent employees. The company last year said it had 3,000 UK employees.

Community, a union representing steelworkers, said the decision was “devastating”, and that it went against plans that the company had previously communicated.

Alun Davies, a national officer at Community, said it was “a body blow to Liberty Steel’s loyal UK workforce, who couldn’t have done more to get the company through an exceptionally challenging period”. He said the union had supported the company on the basis of a plan for “substantial investment and ramping up production”, not a cut in production or idling of sites.

In a statement, Liberty said it would focus on production of higher-value alloy steel manufacturing at its sites in Rotherham, Stocksbridge, and Brinsworth, all in South Yorkshire, and abandon cheaper “commodity grade” products, for which there was tough competition from steelmakers in other countries.

Jeffrey Kabel, who has been leading Liberty Steel’s recovery efforts, said Gupta remained “committed to the workforce here in the UK”. He said the company was still committed to growing production at Rotherham in the longer term, although he did not lay out its strategy for doing so.

“Refocusing our operations will set the right platform for Liberty Steel UK’s high-quality manufacturing businesses to adapt quickly to challenging market realities,” he said.

The company blamed the UK steel industry’s “severe competitiveness issues”, pointing to higher energy costs as well as more stringent environmental restrictions compared with other steelmaking countries.

Politicians, unions and the steel industry all said that Liberty’s redundancies should serve as a wake-up call for the UK government. The industry has been calling for specialised help for steelmakers to cope with higher energy costs and for the costs of upgrading to lower-emissions technology.

The chancellor, Jeremy Hunt, is understood to be considering help for British Steel, a Chinese-owned rival, but no announcements of support for companies or the industry as a whole have been made.

Jonathan Reynolds, the shadow business secretary, said Labour would invest in green steel. “Endless sticking plasters from the Conservatives have left our UK steel sector on the brink. Instead of finding a long-term solution, successive Conservative governments have lurched from crisis and bailouts, with no plan to keep UK steel internationally competitive or deliver a return on taxpayers’ investment.”

Gareth Stace, director general of UK Steel, a lobby group, said there was an “ongoing risk that accompanies a persistently uncompetitive business environment here in the UK, further exacerbated by global supply chain difficulties”.

Reynolds and Stace called for action from the government to cut energy costs, and for a plan for decarbonisation of the sector.