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Tata steel crisis: Welsh government opens talks with possible buyers Tata steel crisis: Sajid Javid starts sale talks amid warning against break-up
(about 2 hours later)
The Welsh government has said Port Talbot and Tata Steel’s other UK sites cannot be allowed to close and has opened talks with potential buyers about a rescue deal. Sajid Javid is to start talks with potential buyers for Tata Steel’s UK operations, with the Welsh government and trade unions claiming that the Port Talbot steelworks cannot be allowed to close and warning against any break-up of the business.
Carwyn Jones, the first minister, told the Welsh assembly: “Welsh steel – British steel - cannot be allowed to die.” The beleaguered business secretary will meet with tycoon Sanjeev Gupta on Tuesday morning to discuss the potential sale of Tata Steel’s UK operations, amid warnings that there are only three to four weeks to secure interest.
Jones said there had been early expressions of interest in Tata’s UK operations but called on the Indian owner to allow a realistic timeframe for the sale to go through. Javid has placed the Department of Business, Innovation and Skills into “full crisis mode” as he attempts to show that he is taking steps to help Britain’s steel industry, sources have told the Guardian.
“This should be months, not weeks,” he told the assembly, which has been recalled to deal with the crisis. “As they prepare to withdraw from Wales, Tata must have regard for its legal and moral responsibilities. Tata has duties and obligations to its workforce and steel communities. It is a company with a global reputation for corporate social responsibility and they should not surrender that reputation cheaply.” Trade unions said that the government’s handling of the crisis has been a “disaster”.
His intervention came as steelworkers prepared to make a fresh plea for government support for the industry. Shop stewards from sites across the UK are holding talks with the Community and Unite trade union leaders in London. Steelworkers made a fresh plea for state support after members of the Community, GMB and Unite trade unions held talks in London. They called on the government to back a plan that involves £1.5bn being invested into Tata’s operations over 10 years, with the state providing support for two to three years until the business is self-sufficient.
The unions said the government can bypass EU state-aid rules by modernising Port Talbot’s blast furnaces and claiming it is investment into research and development, skills, and lowering carbon emissions. They also said urged against a break-up of Tata’s business, claiming a blast-furnace only operation in the UK is “not sustainable”.
Tony Burke, assistant general secretary of Unite, said: “It is clear that last week the government’s eye wasn’t on the ball. It was a disaster. We have got to get the prime minister to intervene.
“There were more questions than answers last week. Now we are looking for answers to the questions.”
In Wales, Carwyn Jones, the first minister, told the national assembly that Welsh and British steel “cannot be allowed to die”.
Tata Steel is one of the biggest private employers in Wales thanks to its ownership of the Port Talbot steelworks.
Jones said there had been early expressions of interest in Tata’s UK operations but called on the Indian firm to allow a realistic timeframe for the sale to go through.
“This should be months, not weeks,” he told the assembly, which has been recalled to deal with the crisis. “As they prepare to withdraw from Wales, Tata must have regard for its legal and moral responsibilities. Tata has duties and obligations to its workforce and steel communities.”
Edwina Hart, the Welsh economy minister, warned against the “cherry picking” of Tata’s assets.
Some potential buyers, including Gupta, who controls metals group Liberty House, have indicated they are only interested in certain parts of Tata’s UK business, such as rolling mills that convert steel into specific products. This raises the prospect of Port Talbot, which is particularly struggling, being ignored by buyers.
Related: Steel crisis: UK response 'slow and inadequate' says Welsh first minister - Politics liveRelated: Steel crisis: UK response 'slow and inadequate' says Welsh first minister - Politics live
A series of planned meetings between Tata and the government are also taking place as potential buyers emerge for the Indian company’s UK business. Hart said: “I think it is quite clear to say that we are concerned to ensure that we don’t fragment the steel industry across the UK.
David Cameron will on Tuesday meet with the Welsh first minister to discuss the steel crisis, with the embattled business secretary, Sajid Javid, meeting Tata’s chief financial officer on Monday. “We need a viable industry that requires investment and we wouldn’t want people cherry-picking and taking plants out of the equation.”
The government was caught out when Tata announced last week that it planned to sell off its British assets, putting 15,000 jobs at risk at the company itself and a further 25,000 jobs in the supply chain. Hart was speaking after chairing a steel taskforce in Cardiff.
Jones called on the UK government to put nationalisation on the table. They must “take the plants into public ownership until a buyer can be found”, he said, adding that the Welsh government would contribute from its resources. In an interview with Bloomberg, Gupta admitted that blast furnaces are “more difficult” to turnaround than the rest of the UK steel industry.
He called the Tata decision “deeply disappointing”, saying the company had rejected a turnaround plan from its European management, and said it was not the fault of the workforce. He said: “What is more difficult is the blast furnaces, the liquid end of the steelmaking.
“The plants are well managed and the workforce has done everything asked of them – and more,” he said. “The UK imports all its raw material. That wasn’t the case when this plant [Port Talbot] was set up. Then the raw material was produced domestically. Now we import iron ore and coal. We import nearly three tonnes of material to make one tonne of steel.
“The current situation has been created by distorted conditions in the global steel market, and not by any inefficiency on the part of the workforce.” “There are two solutions to this problem. Either we import slabs ... or alternatively there is a homegrown solution, which is tougher, which is that we use domestically available scrap. UK exports nearly 7m tonnes of scrap. That could be all turned into steel.
He sounded a positive note about potential buyers. “I’ve spoken to one potential buyer this morning. How we deal with these expressions of interest is the substance of our joint work with the UK government. “You have to close down blast furnaces, not overnight, it is a transition. But you have to close the blast furnaces and erect arc furnaces. It is a major investment programme. It is tougher. But it is a solution.”
“I expect there will be support for our steel communities in every part of this chamber. As I said at the outset, the workforce, their families and their communities are at the front of our thoughts. But we are driven not just by sentiment. We are not arguing to prop up a dying industry. Wales needs steel. Britain needs steel.” The UK government is trying to reorganise after it was caught out by Tata’s announcement last week that it planned to sell off its UK assets, putting 15,000 jobs at risk at the company itself and a further 25,000 jobs in the supply chain.
He argued that it was vital to the country’s long-term strategic interests, including over the economy and defence. Javid’s meeting with Gupta is one of a series being held by the business secretary as he tries to fend off claims that he has been sidelined by the prime minister after a slow initial response to the crisis. The prime minister will meet with Carwyn Jones on Tuesday.
“A United Kingdom without steelmaking is a United Kingdom which is enfeebled and smaller in the world.” However, a source said it was “not true” that that the Conservative minister was not in control of the situation, claiming he had ensured his staff were working around the clock.
Tata’s UK business includes the Port Talbot steelworks – the biggest steelworks in the UK which employs 4,000 people. Javid met senior directors inside his department on Monday, and is due to meet with Tata’s Europe team along with Cabinet Office minister, Oliver Letwin, and George Osborne, the Chancellor of the Exchequer.
The Department of Business, Innovation and Skills said there were plans for “continuous engagement” until a buyer was secured.
However, the Welsh first minister called on the UK government to put nationalisation on the table. They must “take the plants into public ownership until a buyer can be found”, he said, adding that the Welsh government would contribute from its resources.
“The current situation has been created by distorted conditions in the global steel market, and not by any inefficiency on the part of the workforce,” Jones added.
He sounded a positive note about potential buyers. “I’ve spoken to one potential buyer this morning. How we deal with these expressions of interest is the substance of our joint work with the UK government.”
A small group of parties interested in buying sites from Tata have emerged. However, they would all need significant support from the government and it is doubtful whether they would want to buy the entire business or Port Talbot itself.A small group of parties interested in buying sites from Tata have emerged. However, they would all need significant support from the government and it is doubtful whether they would want to buy the entire business or Port Talbot itself.
These parties include Liberty House, run by Sanjeev Guupta, and investment firm Greybull. These businesses are already buying assets from Tata – Greybull is close to acquiring its Scunthorpe steelworks and could also revive the British Steel brand by buying it from Tata. These parties include Liberty House and investment firm Greybull. These businesses are already buying assets from Tata – Greybull is close to acquiring its Scunthorpe steelworks and could also revive the British Steel brand by buying it from Tata.
Another potential saviour is ThyssenKrupp, the German industrial conglomerate. ThyssenKrupp was in talks to buy Port Talbot and Tata’s other UK sites as part of a deal to buy its European business, including a major steelworks in the Netherlands. However, talks broke down around three months ago over concerns about the mounting losses in the UK and its pension liabilities of £15bn.Another potential saviour is ThyssenKrupp, the German industrial conglomerate. ThyssenKrupp was in talks to buy Port Talbot and Tata’s other UK sites as part of a deal to buy its European business, including a major steelworks in the Netherlands. However, talks broke down around three months ago over concerns about the mounting losses in the UK and its pension liabilities of £15bn.
Reports in Europe claim that ThyssenKrupp is now interested in merging its steel business with Tata Steel’s European division after the sale of its UK arm, with the new business spun off as a joint venture. The dire financial situation facing Tata’s UK steel business makes the prospect of any rescue deal difficult. It is understood that Tata Steel is losing £2.5m a day in the UK, up from the £1m figure first reported, and that it will lose at least £100m in running a sales process until the end of April.
However, sources close to Tata believe a deal could potentially be rekindled if the UK government provides financial support and the pension scheme is restructured.
The dire financial situation facing Tata’s UK steel business makes the prospect of any rescue deal difficult. It is understood that Tata Steel is losing £2.5m a day in the UK, up from the initial £1m, and that it will lose at least £100m in running a sales process until the end of April.
The government’s preferred option is thought to be securing a rescue deal by arranging a loan for a new buyer. This loan would need to be on commercial terms so as not to fall foul of EU state-owned rules.
It is also trying to sound out potent buyers, including private investors and international steel companies. The billionaire tycoon Wilbur Ross, who bought a stake in Virgin Money, is to be approached, according to reports.
The government will appoint a financial adviser to support its efforts as early as Monday.
Sajid Javidhas said that any buyer is likely to need support with the cost of energy, the pension scheme, and modernising Tata’s plants.
Tata’s pension liabilities are a major hurdle for any buyer. The British Steel Pension Scheme (BSPS), which was inherited by Tata when it bought Corus in 2007, has £14.5bn of liabilities and 130,000 members, making it one of the biggest pension schemes in the UK.
Accounts for the business show Tata last year had to pump £129m into the scheme and will spend even more in 2016.
One option for the government is to nationalise the scheme – as it did with Royal Mail – although this could be blocked by EU state-aid rules. Alternatively, the scheme could be taken over by the Pension Protection Fund, although this would mean members having their pensions cut.
The prime minister’s spokeswoman hit back at claims by Brexit campaigners, including Boris Johnson, that coming out of the EU would help Britaintackle Chinese steel dumping.
“Around 50% of our steel exports go to the EU so it is very important to retain access to that market. By being in the EU we are a market of 500 million consumers,” she said, insisting that Britain had more power than it would have alone.