Tata confirms plan to sell UK steel businesses

Vapor rises above Tata Steel's plant in Port Talbot, south Wales, on January 18, 2016.
Geoff Caddick | AFP | Getty Images
Vapor rises above Tata Steel's plant in Port Talbot, south Wales, on January 18, 2016.

The British steel industry suffered a severe blow as Tata, the Indian steel giant, confirmed fears that it was about to put its UK business up for sale.

Late on Tuesday the Indian group said it was "looking at strategic alternatives" to the current ownership "to explore all options for portfolio restructuring, including the potential divestment of Tata Steel UK, in whole or in parts".

Earlier, union sources had revealed that the company was poised to announce the sale of its British steel operations, plunging several plants — at Port Talbot, Rotherham, Corby and Shotton — into uncertainty.

Steel workers had been waiting for days for a decision to be made by the Tata board 4,700 miles away in Mumbai over the fate of Britain's steelworks.

Stephen Kinnock, Labour MP for Aberavon — who had joined Community union officials in Mumbai to try to persuade the Tata board to keep Port Talbot, Britain's largest steelworks, open — told the South Wales Evening Post that the company intended to sell the steelworks.

Instead of the hoped-for approval of a rescue plan, Tata is intent on selling its UK businesses in a move that will come as a hammer blow to the remnants of one-time British Steel.

Tata painted a stark picture of the prospects for its UK business, saying that trading conditions in the UK and Europe had rapidly deteriorated recently due to "structural factors" such as global oversupply, increasing imports, high manufacturing costs and weak domestic demand. These were likely to continue into the future and had "significantly" affected the long-term competitiveness of its UK operations.

In comments that may damp hopes of finding a buyer, the company's board concluded that the turnround plan for the Port Talbot was "unaffordable", the assumptions behind it "very risky" and the likelihood of delivery "highly uncertain".

Leanne Wood, leader of Plaid Cymru, demanded a recall of the Welsh national assembly to co-ordinate a political response to the news.

"The priority now must be to seek out a reliable potential buyer to ensure that the highly-skilled workforce at Port Talbot can continue to produce world-class steel," she said.

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Roy Rickhuss, general secretary of Community, the steelworkers' union, said: "Our worst fear that Tata would announce plant closures today has not been realized  . . . it is vitally important that Tata is a responsible seller of its businesses and provides sufficient time to find new ownership."

Jeremy Corbyn, Labour leader, said ministers had to act to protect the steel industry and the core of manufacturing in Britain.

"It is vital that the government intervenes to maintain steel production in Port Talbot, both for the workforce and the wider economy, if necessary by taking a public stake in the industry," he said.

Tata revealed that it had been in talks with the government, seeking support for the UK business — within the scope of European state aid rules — and that these would continue.

Earlier in the evening, the government had denied a claim that it was on standby to part-nationalise Port Talbot.

Amid repeated rumours that the state could step in to rescue the industry, one official said the government was "looking at all viable options". Asked whether that included part-nationalisation, he said: "Not to my knowledge."

Ministers are open to providing support, for example loans or loan guarantees or through further help with procurement. But a private sector sale is the preferred solution, not least because taking responsibility for the steel plants could leave taxpayers on the hook for large losses and invoke EU state aid concerns.

Unite, Britain's largest union, called on the government to intervene. "This is a very dark day for the proud communities and a proud industry which is now on the verge of extinction in this country," said Len McCluskey, general secretary.

British steel workers had delivered for Tata through "thick and thin", he said. "They will feel a grim sense of betrayal by this decision, because they know that given half a chance they can make Port Talbot and sites across the UK profitable and successful."

Port Talbot is heavily lossmaking, reflecting the troubles faced by British steelmakers. A combination of high costs and low steel prices on the international market has severely damaged the sector, leading to thousands of job losses over the past year.

In January 750 job cuts were outlined at the south Wales plant, under a turnround plan devised by local management. The government was on standby to offer support for that plan but was first waiting for a commitment from Tata.

In recent weeks concerns had grown that Tata Steel had cooled on further large investment into its UK operations. The company has poured £3bn into its European operations since acquiring Anglo-Dutch steelmaker Corus in 2007 for £6.2bn.

Tata is in the process of selling its long products business, based at the Scunthorpe steelworks, to investment firm Greybull Capital. It confirmed on Tuesday that talks with Greybull would continue. The government has been in talks with the prospective buyer over a commercial loan to help fund a £400m rescue deal.

The move to sell all assets comes just as conditions in the European steel market are showing tentative signs of improving. Since the end of last year, steel prices in the UK have gone up by about £30 to £285 per tonne, according to Platts, the price consultancy.

"The environment for British steelmakers is a lot better than it was," said Colin Richardson of Platts. "But my personal view is that [the improvement] isn't sustainable when you look at global overcapacity and waning demand in China".