Despite Britain’s vote to leave the EU and as sterling’s slump potentially boosts the industry’s survival prospects, Tata Steel is close to a deal to save its Port Talbot plant.
With bidders for Tata Steel UK ready to pull out of the process, the steel industry faces a new crisis after the referendum result, MPs and trade unions have said.
The slump in sterling’s value could help the industry and the company is still working on a deal with the government to keep its UK business, The Guardian reported quoting sources familiar with Tata Steel’s thinking.
Tata Steel announced in March that it was considering pulling out of its UK business, which includes the Port Talbot steelworks in south Wales which has put at risk more than 11,000 jobs.
Despite the company starting a sales process for the business, the government pledged to offer hundreds of millions of pounds of support and restructure the company’s pension scheme and Tata Steel UK has decided to work on a deal to keep its UK concern. There are seven bidders who have been shortlisted by the company.
The beleaguered Conservative government’s efforts to help Port Talbot have been criticized and sources said that the decision of Tata Steel still likely to keep the business would be a boost to the Conservative government.
“Unless something drastic happens, then early next week they will make a statement,” the source said.
The weakening of the sterling could soften the impact of Britain voting to leave the EU, which threatens to spark years of uncertainty for businesses, the company believes.
While Cheap imports from China have been one of the factors behind the crisis facing the steel industry, the fall of the pound fell to its lowest levels in 30 years against the dollar means it will be more expensive for China to export steel to Britain.
Whether the government will be strong enough to push through changes to the British Steel pension scheme, which need to be enshrined in law is the main concern for the Indian Steel company as is understood by experts and sources.
The deficit has ballooned to £700m, up from £485m last year, and its liabilities are almost £15bn, the latest figures show.
Under the government’s plan, the inflation-linked annual increase benchmarked against the consumer price index rather than the retail price index and the scheme would be spun off into a new “shell” company which would potentially save billions of pounds in future liabilities.
The company was “committed to developing the best prospects possible for our UK operations”, said a spokesman for Tata Steel.
“Decisions by the UK electorate will always be respected by Tata Steel. Whatever the political framework, we are committed to developing the best prospects possible for our UK operations,” he said.
A rescue deal for Port Talbot could fall apart, worries politicians in Wales and Westminster.
Brexit could cause it “irreparable damage”, said Stephen Kinnock, the Labour MP who has campaigned for the future of the steel industry.
“The vote has taken place, the people have spoken, but I am deeply, deeply concerned about the future of our steelworks in the light of this vote,” Kinnock told BBC Radio Wales.
Following the referendum, talks with the Indian company are close to being abandoned by some of the bidders for Tata Steel UK. The growing likelihood that Tata Steel would keep the business and the sale process is frustrating many.
(Adapted from The Guardian)