Tata Steel near deal to save Port Talbot plant despite Brexit vote

Tata Steel is close to a deal to save its Port Talbot plant despite Britain’s vote to leave the EU, as sterling’s slump potentially boosts the industry’s survival prospects, reports The Guardian.

MPs and trade unions have said the steel industry faces a new crisis after the referendum result, with bidders for Tata Steel UK ready to pull out of the process, according to reports.

Sources familiar with Tata Steel’s thinking, however, say the company is still working on a deal with the government to keep its UK business, and that the slump in sterling’s value could help the industry.

More than 11,000 jobs are at risk after Tata Steel announced in March that it was considering pulling out of its UK business, which includes the Port Talbot steelworks in south Wales.

The company began a sales process for the business, and seven potential bidders were shortlisted, but it has decided to work on a deal to keep its UK concern after the government pledged to offer hundreds of millions of pounds of support and restructure the company’s pension scheme.

A senior source close to the Indian company said it was still likely to keep the business, which would be a boost to the beleaguered Conservative government, whose efforts to help Port Talbot have been criticised. The source said: “Unless something drastic happens, then early next week they will make a statement.”

The company believes the impact of Britain voting to leave the EU, which threatens to spark years of uncertainty for businesses, could be softened by the weakening of sterling.

The pound fell to its lowest levels in 30 years against the dollar on Friday, which means it will be more expensive for China to export steel to Britain. Cheap imports from China have been one of the factors behind the crisis facing the steel industry.

It is understood, however, that Tata Steel’s main concern is whether the government will be strong enough to push through changes to the British Steel pension scheme, which need to be enshrined in law.

The latest figures show the deficit has ballooned to £700m, up from £485m last year, and its liabilities are almost £15bn.

Under the government’s plan, drawn up with trustees and trade unions, the scheme would be spun off into a new “shell” company and the inflation-linked annual increase benchmarked against the consumer price index rather than the retail price index, potentially saving billions of pounds in future liabilities.

The pension protection fund and some MPs, however, have said this could create a dangerous precedent and encourage other companies to walk away from their pension liabilities.

A spokesman for Tata Steel said the company was “committed to developing the best prospects possible for our UK operations”.

“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.

However, politicians in Wales and Westminster are concerned that a rescue deal for Port Talbot could fall apart.

Stephen Kinnock, the Labour MP who has campaigned for the future of the steel industry, said Brexit could cause it “irreparable damage”.

“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.

Some of the bidders for Tata Steel UK are close to abandoning their talks with the Indian company after the referendum. Many were already frustrated by the sale process, however, and the growing likelihood that Tata Steel would keep the business.

The billionaire tycoon Wilbur Ross has signalled that he is ready to withdraw from the process, according to Sky News. However, Liberty House, which is run by Sanjeev Gupta, is still committed.

Gareth Stace, the director of the trade body UK Steel, has said the steel industry faces its biggest ever challenge because of the referendum result. He said: “The decision to leave the European Union will send shockwaves across the UK’s steel industry. Our sector is well versed in having challenges thrust upon it, but it’s clear that this is like no other.”

Stace said: “It is now more essential than ever to create the right business conditions in the UK that allow the steel industry to survive, invest and thrive. This will ensure that our vital supply chains, such as defence, automotive and construction, can rely on the production of steel in the UK so we are self-sufficient and can never be left at the mercy of others.

“Government now needs to fully and finally tackle head-on the uncompetitive electricity and policy costs that have historically hindered the growth of steel producers and seen thousands of high-skilled jobs lost over the last year. Government can now match words with actions and take the lead in dealing with subsidised exports, most notably from China, that are slowly destroying steelmaking in the UK.”