Tata poised to sell UK steel business

Posted on 30 Mar 2016 by Victoria Fitzgerald

Tata Steel has announced it will sell the entirety of its UK business after commenting that trading conditions in the UK and European steel industry had “rapidly deteriorated”.

Tata attributed the global oversupply of steel, imports into Europe, currency instability and growing costs as catalysts for the weakened position of the sector.

Cyrus Mistry, chairman of Tata Steel, said in a statement: “These factors are likely to continue into the future and have significantly impacted the long term competitive position of the UK operations in spite of several initiatives undertaken by the management and the workers of the business in recent years.

This latest news rouses serious concern for the future of the industry.

“Even under these adverse market conditions, the Tata Steel group has extended substantial financial support to the UK business and suffered asset impairment of than £2bn in the past five year.”

He continued, “The board concluded that it would not be able to support the investment necessary to proceed with the proposed Strip Products UK Transformation plan.”

Tata discussions are ongoing and set to continue.

The closures will include South Wales’ Port Talbot site which employs 4,000 people. In January, 750 workers lost their jobs at the plant, as part of 1,000 redundancies all over the UK in the same month.

In 2015, Tata plants in Scunthorpe and Lanarkshire slashed a further 1,200 jobs and this latest news puts one in six jobs in the UK steel sector in jeopardy.

Philippa Oldham, head of manufacturing at the Institution of Mechanical Engineers
Philippa Oldham, head of manufacturing at the Institution of Mechanical Engineers

Philippa Oldham, head of Manufacturing at the Institution of Mechanical Engineers, commented: “The news from Tata Steel Mumbai as to the possible closure of all UK sites is of deep concern.

“Not only will this mean significant losses of around 14,000 jobs but it could lead to a serious long-term impact on UK manufacturing.

“In the latest Budget, the Government announced commitment to our transport infrastructure, supporting the National Infrastructure Commission’s recommendations for Crossrail 2 and extensions of HS2 up to our northern powerhouse region.

“Not only this, but our UK car production reported a growth of 13.1% growth in February. At the heart of all these projects is the requirement for steel.

“The Institution encourages the Government to think long and hard about how they can help the steel industry, making sure that it enables our manufacturing sector to have a sustainable future. To do this they must ensure that we do not become solely dependent on imports of all raw materials such as steel.

“If the Government is committed to long-term strategic industrial and infrastructure plans it must take a holistic approach with a better understanding of how such closures could affect our domestic supply chains.

“We must ensure that the UK has the necessary skills and raw materials that we need to support these upgrades with suggestions of improved forms of financing and life-cycle costing to be part of the public procurement policies.”

Terry Scuoler, CEO, EEF
Terry Scuoler, CEO, EEF.

CEO of EEF, Terry Scuoler said: “This is potentially a massive blow for the UK steel industry, wider manufacturing and for the local community.

“It is now essential that ongoing support is provided by the company to continue operation of the plant which will provide time to find a suitable buyer. In tandem with this, the UK and Welsh Governments must match words with action and take all necessary steps to ensure there is a future for the steel industry in the UK by any means possible.

“As well as short term emergency measures, in the longer term we need to see all major procurement projects, from HS2 to Hinckley Point, all using British Steel. Ministers can also do more by reforming business rates to exclude some of the penalties steel companies and others face if they invest in plant and machinery.

“Alongside this, the UK has one of the highest electricity costs for the energy intensive industries in Europe because of hindering domestic policy. We need to see a level playing field with our European competitors to ensure a positive future for the steel sector.

“Finally and, perhaps most importantly, it is vital the UK Government supports aggressive measures at EU level to prevent Chinese dumping.”