Ministers Start Hunt for Tata Steel Buyers
1 April 2016
Sajid Javid will travel to south Wales on Friday to promise steelworkers that the government will use all “ministerial, official and diplomatic levers” to help save their jobs, including actively seeking out buyers for Tata Steel’s British assets.
Arriving three days after the crisis broke, the business secretary will attempt to reassure 4,000 employees at the Port Talbot plant, despite a warning by David Cameron that the global collapse in the price of steel and massive overcapacity meant there was “no guarantee of success”.
It is understood that senior Whitehall officials have contacted Liberty House, a steels and metals group with an annual turnover of close to £5bn, which is in the process of buying sites in Scotland. Private equity companies, which would be likely to undertake radical cost-cutting steps, are also being approached.
Javid said he would meet workers, managers, unions, MPs and members of the Welsh government, and promised to do what he could to secure the long-term future of the company and steel industry. “Whilst we can’t change the status of the global steel market, we can and are playing a positive role in securing a sustainable future,” he added.
A source within Tata confirmed that the government was leading the efforts to find interested parties, but revealed that one option under consideration was a sale of “different portfolios”, which would mean breaking the company up. However, sources inside Tata Steel said the company, which is losing £1m a day on its UK operations, had failed to find a buyer over the past 18 months.
Tata Steel has appointed PwC to advise it on the restructuring of its UK business, but even though the company is willing to release its assets for “nothing”, investors could be put off by potential liabilities. The company – essentially the former British Steel and the UK assets of Corus – may also need a pension fund top-up of £2bn.
After hosting an emergency summit at No 10 following his return from holiday, Cameron said the situation was “of deep concern”, but added: “I don’t believe nationalisation is the right answer. What we want to do is secure a long-term future for Port Talbot and for other steel plants in the UK.”
Jeremy Corbyn, the Labour leader, had said he was shocked by the idea of ministers taking nationalisation off the table, while the shadow chancellor, John McDonnell, urged ministers to consider a temporary return to public ownership and suggested that they should “get a grip”.
The government is trying to deflect criticism of its handling of the situation, which unfolded while Cameron, Javid and George Osborne were all overseas. Javid was ordered to return from an official trip to Australia, where he delivered an untimely speech in which he described himself as a “proud capitalist”.
The business secretary’s attempt to defend the twin concepts of free enterprise and free trade was seized on as inappropriate because the British steel industry has been placed under great duress by cheap imports from China. He faced further embarrassment when it emerged that he had taken his 16-year-old daughter away with him, and was planning a family holiday after official engagements. Javid’s long journey home meant he missed the emergency meeting of ministers about how to tackle the crisis, which critics said he ought to have seen coming.
The business secretary has said that once the formal Tata sales process is under way, independent advisers will be appointed by the government, with Jim O’Neill, the commercial secretary to the Treasury, and the Welsh secretary, Alun Cairns, also involved. They will be “engaging with the market for potential buyers”.
The foreign secretary, Philip Hammond, warned of a “reality of a world which is drowning in an oversupply of steel”, arguing that producing steel for which there is no demand is not the answer. But with up to 40,000 jobs on the line nationally, ministers are under pressure to act.
The government said its intervention helped ensure that Tata announced a sales process for Port Talbot, rather than immediate closure.
But ministers have been widely attacked for failing to take more action. Anna Turley, Labour MP for Redcar, said similar promises were made in her constituency but the government failed to act, resulting in the loss of 3,000 jobs when the steel plant there was closed by its Thai owner SSI in October last year.
Stephen Doughty, another Labour MP, said he had publicly raised the challenges facing the steel industry with the government more than 60 times, and attended a series of meetings in which ministers were urged to take action.
“They cannot argue that they didn’t know or that the crisis point of the last few days has come as a surprise. They were warned again and again and again by the industry, by unions and by MPs,” he said.
Cameron is expected to raise the issue of the future of Tata’s UK steel assets when he meets the Indian president, Narendra Modi, on the sidelines of a nuclear security summit in Washington, where the prime minister arrived on Thursday night.
Asked whether Javid should have been monitoring events at Tata instead of visiting Australia, a No 10 source said: “People can debate that issue if they want; the truth is, he’s come back.” He added that finding a buyer for Tata’s steel assets was likely to be a lengthy process, which would involve Treasury minister Lord O’Neill – the former chief economist at Goldman Sachs – and the prime minister’s trouble-shooter, Oliver Letwin, as well as Javid. “This is going to take a lot of hard work; these are complex issues,” he said.
Government sources stressed Javid’s visit on Friday is his second to the area, and that he recently chaired a steel summit in Whitehall. But critics say the government has failed to support the industry. Labour pointed out that Tory MEPs voted against EU proposals to take tougher action on Chinese dumping.
In a scathing attack the head of the European Steel Association, Axel Eggert, accused Britain of being a “ringleader” in attempts to block stronger defences for EU countries against cheap Chinese imports.
Britain blocked attempts to strengthen EU trade defences against imports of cheap Chinese steel that have devastated Tata’s operations in the UK, according to senior European officials. The Financial Times reported that French and Italian officials also said Britain had led the opposition to an overhaul of anti-dumping rules.
Ministers stand accused of having “rolled the red carpet out” to China – with Labour MP Stephen Kinnock, who represents the constituency containing Port Talbot, arguing that Britain’s industrial strategy was being drawn up in Beijing. He told the Guardian that Osborne had pushed for China to be granted market economy status – a move that Tata executive Tim Morris recently told MPs was like “sleepwalking” into an even deeper crisis.
Chris Hagg, head of external affairs at another steel company, Celsa UK, said he wanted to see more action taken on energy costs. “Our industry needs to be put in a position where it can compete on a fair basis. The government needs to do more to help us on the energy front,” he said.
The issue has led to a fierce row between pro- and anti-EU campaigners. Stephen Kinnock accused Brexit campaigners of “cynically attempting to hijack and exploit” the steel crisis to their own advantage.
Writing for the Guardian, the MP for Aberavon said it was absurd to suggest that leaving the EU would allow the government to protect the British steel industry. He accused ministers of cosying up to China, adding: “The reality is that the European commission has been trying to tackle the steel crisis for years now, but has consistently been hamstrung by a British government fighting tooth and nail to undermine those efforts.”
But Tom Pursglove MP, campaigning for Brexit, said: “If the UK were to leave the EU, we would have the flexibility to react to the current steel industry crisis with anti-dumping measures to counter the Chinese tactic of flooding the market with cheap steel.”
Source : theguardian.com