International Steel Mills

Tata Steel May Keep British Assets

Written by Sandy Williams

Tata Steel’s British steelmaking division is up for sale but it is now looking like Tata may keep the UK business.

Last week it was reported that Tata was reviewing operations at the UK facilities and assessing offers of financial support from the government. The Daily Mail reports “sweeteners” offered by the Prime Minister include cheaper energy, financing and help with research and development.

In addition, the government is considering adjustments to the British Steel Pension Scheme (BSPS) that has been a sticking point in negotiations for the UK assets. The £14 billion pension fund is underwritten by Tata Steel and has a deficit of 700 million pounds. The government proposal would cut the pension funds long-term liabilities by benchmarking it to the consumer price index (CPI) instead of the retail price index (RPI). Doing so could save the BSPS around £2.5 million. Reducing the fund’s liabilities would keep it out of the Pension Protection Fund.

Secretary of State for Work and Pensions Stephen Crabb said: “Britain’s steel industry is an important part of our economy which is why we are doing everything we can to support it and secure a long-term viable future. “As part of this it’s right that we do all we can for the British Steel Pension Scheme, to support a sale and deliver clarity for scheme members.”

Steve Webb, director of policy at pensions firm Royal London, said the desire to save steel jobs is understandable but cautioned, “A deal on Tata must not create a precedent or a loophole which could be exploited by firms keen to walk away from their pension liabilities. Ministers must tread with extreme caution in this area.”

Tata Steel has not confirmed that it has changed its mind about selling its British assets. Tata Executive director Koushik Chatterjee told reporters, “Let’s focus on the sales process. Let’s see where we get to.”

The possibility of Tata canceling the sale has been met with skepticism in Britain. Labour MP Stephen Kinnock said British steelworkers have been “through hell in the last few years and certainly since March when the sale was announced.”

Kinnock added, “I think they’ll be forgiven for treating any news that Tata is staying on board with a degree of skepticism and even anger. So I think we need a very clear set of guarantees from Tata that they will be in it for the long run, that there will be investment and they will be doing what’s needed so we’re not back at square one 12 months from now.”

Tata Steel has been accused of “brinkmanship,” using the proposed sale of the UK assets to force concessions out of the government, according to reports by the Daily Mail.

“Several potential buyers are now said to have dropped out after it was claimed Tata demanded that any new owner pays off a £900m intra-company loan,” wrote the Daily Mail. This has fuelled claims that the company always wanted to stay on and is engaged in ‘a game of brinkmanship to get concessions out of the government.'”

Three firms are believed to still be contending for UK assets, Liberty House, GreyBull Capital and turnaround fund Endless.

Tata’s long steel division has been sold to Greybull Capital for a reported £400 million. The long division employs 3,000 people in Scunthorpe and 1,800 workers at other plants and will be rebranded as British Steel.

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