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Government could co-invest in Tata's UK steel assets, says Sajid Javid

Published 11/04/2016

It is hoped that the deal for the Scunthorpe plant will be finalised
It is hoped that the deal for the Scunthorpe plant will be finalised

The Business Secretary has raised the prospect of Government involvement in the sale of Tata Steel's loss-making UK assets in a move which has surprised many in the industry.

Sajid Javid told the Commons he had been in contact with potential buyers, making clear that the Government stands ready to help.

"This includes looking at the possibility of co-investing with a buyer on commercial terms," he said.

He later said that the Government had not ruled anything out, before repeating his belief that the best way forward was for a sale to a private buyer.

Union sources said they would welcome the speech if it meant the Government was planning to become more involved in the sale.

The search for a buyer for Tata Steel's UK business has started, with "many tens" of firms set to be contacted in the hope of saving thousands of jobs.

Executive group director Koushik Chatterjee said the aim was to sell the assets as a whole rather than splitting up the business.

He spoke after Tata announced the signing of an agreement to sell its Long Products business, including the giant Scunthorpe plant, to investment firm Greybull Capital.

T he deal safeguards thousands of jobs and holds out fresh hope that the rest of the business can be saved.

The sale covers several UK-based assets including the Scunthorpe steelworks, two mills in Teesside, an engineering workshop in Workington, Cumbria, a design consultancy in York, and associated distribution facilities, as well as a mill in northern France.

The deal will be completed in around eight weeks, once a number of outstanding conditions have been resolved, including transfer of contracts, certain Government approvals and the satisfactory completion of financing arrangements.

The Long Products Europe business, which employs 4,800 people - 4,400 in the UK and 400 in France - will be renamed British Steel.

The Government and unions welcomed the deal, which took nine months to complete.

Mr Chatterjee declined to give a timescale for the sale of the rest of the business, saying there would be different stages, starting with the launch of the official process on Monday.

"Let the process start," he told a media briefing.

He confirmed that the UK business as a whole, including the huge plant at Port Talbot in South Wales, is losing £1 million a day, and for the last year has been making "significant" losses, adding that the steel industry is facing its biggest crisis possibly in 50 years.

It is understood that more than two firms have expressed an interest in Tata's plants, including Liberty House.

Advisers KPMG will start "reaching out" to many tens of potential buyers, said Mr Chatterjee, adding: "We will run this process in a credible manner but it is important we don't have a very long, uncertain period for the employees, suppliers and customers."

Mr Chatterjee said the capital commitment needed in the short and long term was not something the Tata board could afford to support.

No price is mentioned in the documents being sent to interested parties.

Mr Chatterjee said he would never describe the purchase by Tata in 2007 of the steel business from Corus as a mistake.

Union members at Scunthorpe are being balloted on whether to accept a 3% cut in pay and reductions in pension contributions for a year to smooth the path for the Greybull deal, with the result due next week.

Mr Javid said: "Today's announcement is a step in the right direction for the long-term future of British steel manufacturing in Scunthorpe.

"This agreement wouldn't have been reached without the efforts of all those involved, especially the high-skilled workforce and local management. We will continue to work with Tata and Greybull and, as we have said, stand ready to provide funding on a commercial basis if required.

"The UK and Welsh governments are working tirelessly to support Tata Steel to reach a deal for Port Talbot and their other sites across the UK. This agreement sends positive signals to any potential investor for the rest of Tata's UK business."

Gareth Stace, director of UK Steel, said: "This is clearly good news for the British steel sector, and I hope it will provide a much-needed boost for steelmaking in the UK.

"However, while very welcome, it does not mean that we are out of the woods yet. A long-term investor is needed, in the very short term, for the remainder of the whole of the Tata Steel UK business, including Port Talbot."

Roy Rickhuss, leader of the Community union, said: "We are encouraged by the fact the Government has confirmed it is not ruling out any options to secure the future of the UK steel industry.

"In particular, the suggestion that the Government could co-invest with new owners in the interests of the long-term future of steel-making in the UK helps to send the right signal to potential investors and to Tata Steel's customers that the Government is determined to maintain the integrity and continuity of the business.

"Mr Javid should bring forward further details of what 'co-investment' would look like and share his plans with the unions so we can ensure that the best interests of steelworkers are upheld.

"There are still many steps to be taken and yet again we call on the Government to match the rhetoric of its ministers with action and to continue to work with the Community to save our steel."

Tony Burke, assistant general secretary of Unite, said: "We sincerely hope that Sajid Javid is serious in this promise to do everything he can to keep the steel sector functioning and our members will be holding him to his commitment to co-invest to secure the futures of Port Talbot, Shotton, Rotherham and other Tata sites across the UK in the coming weeks.

"The penny appears to have dropped that there should be an active Government supporting steel and manufacturing as the best best hope of securing the future of the industry. We look forward to sitting down with Secretary of State to hear more of his plans for co-investment."

There will be a debate in the Commons on Tuesday on the steel crisis.

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