Steel Industry Dealt Hammer Blow As Tata Withdraws From UK

30 March 2016

The steel industry was dealt a hammer blow on Tuesday as it emerged that Tata plans to completely withdraw from its British operation, putting thousands of jobs at risk.

The Indian conglomerate’s board decided to pull out of the UK after rejecting a turnaround plan for Port Talbot, the nation’s biggest steelworks. The South Wales plant employs around 4,000 who face an uncertain future as Tata now seeks a buyer for its British steel assets.

Steelworks in South Yorkshire, Northamptonshire and County Durham are also set to be put up for sale.

A Tata spokesman said: "The Tata Steel Board came to a unanimous conclusion that the [turnaround] plan is unaffordable... the assumptions behind it are inherently very risky, and its likelihood of delivery is highly uncertain."

Tata said it had ordered its European steel subsidiary to "explore all options for portfolio restructuring including the potential divestment of Tata Steel UK, in whole or in parts".

The decision by Tata placed the Government under pressure to step in to save Britain’s steel industry. Anna Soubry, the industry minister, has said that “in the words of the Prime Minister, we are unequivocal in saying that steel is a vital industry”.

As Tata’s decision emerged from Mumbai, officials were looking at options to secure the survival of British steel making under new owners.

It is understood they could include similar measures to those taken by the Scottish government to facilitate the acquisition of two former Tata mills by the commodities investor Liberty House.

Taxpayers footed the bill to keep workers on standby and the plants were even temporarily nationalised while the deal was finalised.

•  Steeled for a bleak future: on the streets of Port Talbot

Such a rescue for Port Talbot would likely be much more expensive and complicated, steel industry sources conceded. The Scottish mills employ hundreds rather than thousands, and Port Talbot is said to be losing around £1 million per day.

The crisis that has gripped the industry over the past year deepened on Tuesday night after a day of high tension. A delegation of local Tata managers and union representatives had travelled to Mumbai to appeal to the board to fund their tunaround plan for Port Talbot.

It called for a £100 million investment, 750 job cuts and two years to turn heavy losses into profits.

But ahead of the meetings industry sources revealed fears that Tata would demand results in only 12 months and that the plan was being “set up to fail”.

Their fears of failure were realised after a day of politicians trading blows over who was to blame for the steel crisis. It has already claimed 5,000 jobs  in the last year as China has dumped surplus supplies onto the global market at low cost.

Ms Soubry responded to criticism of the Government’s handling of the crisis by arguing that Vince Cable, the former business secretary, should have done more to protect the steel industry under the coalition. “I think Vince could have done more, yes. Sorry, but that is my view,” she said in a radio interview.

Tim Farron, the Liberal Democrat leader, called the claim “utter rubbish” and Mr Cable said: “Since the Conservatives have been in government alone they have taken their eye off the industrial strategy we set out in coalition.”

The Unite union said steel workers would feel “a grim sense of betrayal” at Tata’s decision and that the industry was “on the verge of extinction”.

Len McClusky, the union’s general secretary, said: “Ministers must honour their promises to keep the lights over the UK’s steel communities burning.”

Stephen Kinnock, Port Talbot’s local MP, said: “One way or another we will continue to make steel in Port Talbot but it looks like Tata do not back the plan.”

Potential new owners are active in the market. As well as Liberty House, Tata could seek further discussions with the turnaround fund Greybull as it prepares to pull out of the UK steel industry.

The pair are already in discussions over the sale of Tata’s Scunthorpe plant.


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