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Tata Steel selling assets due to 'structural weaknesses' in UK, says official

Published 28/04/2016

Business Secretary Sajid Javid will face questions from MPs on the crisis in the steel industry
Business Secretary Sajid Javid will face questions from MPs on the crisis in the steel industry

Steel giant Tata blames "structural weaknesses" in the UK for its decision to sell its assets and would not have made the shock move if it was making money, according to a top official.

Bimlendra Jha, chief executive of Tata Steel UK, said he could not confirm a claim by Business Secretary Sajid Javid that the company had planned to close the giant Port Talbot plant immediately.

The board had only decided to try to find a buyer, he told the Business Select Committee.

He told MPs there was no set deadline for selling the loss-making assets, but made it clear that Tata could not continue to "bleed" indefinitely.

He was "not aware" that Tata had threatened to close Port Talbot before trying to find a buyer.

"We would not be selling the business if we were not losing money," said Mr Jha, adding that the UK had structural weaknesses around energy prices and business rates.

If energy prices were the same as in Germany for example, Tata would be £40 million better off, he said.

Prime Minister David Cameron visited the Tata Steel works in Port Talbot, South Wales, on Tuesday to assure workers, unions and bosses of the Government's commitment to support the future of steel-making at the under-threat plant.

Mr Jha said a timescale had been set out for different stages of the sale but told MPs there was no "ultimate" date.

He said there was an "accelerated" timescale, but this was partly to reduce uncertainty in the industry.

Mr Jha said he believed manufacturing in Britain had been in decline, affecting industries other than steel as well as firms in the supply chain.

"When you get headwinds such as a stronger currency, you only have to go over the Channel to buy products in an open market."

Mr Jha said if the pension fund liability at Tata is not taken care of there would be no buyer for the business, adding: "If we don't solve it we are staring at some very bad consequences for the taxpayer ... We are staring at a huge economic and social disaster."

Gareth Stace, director of trade group UK Steel, said progress had been made on four of the five measures the industry had been pressing for government action on, but they had not been resolved.

Ministers had announced measures on compensation for energy-intensive industries like steel, but even after these were implemented, UK firms would still be paying 25% more for electricity than those in Germany, he said.

UK Steel will be presenting ideas to the Government on how to bridge the gap which Mr Stace said he hoped would be implemented.

Roy Rickhuss, general secretary of the Community union, said it took the closure of the Redcar steelworks to spur the Government into taking action to help the industry.

"The tragedy is that we were warning that Redcar was happening for some time. I believe that plant should not have been allowed to go under. The Government could have stepped in and secured the plant," he said.

Mr Javid told MPs that Tata in India had told the Government in mid February it was "seriously considering" closing its steel operations in the UK, including Port Talbot.

The minister said his focus following the warning was to persuade Tata not to close plants immediately, but to give time to find another buyer.

Pressed by business select committee chairman Iain Wright on why he had not travelled to Mumbai for the crucial board meeting on March 29 rather than go on a trade mission to Australia, Mr Javid said he did not believe a decision to immediately close the plants would be taken.

"You were blind sided by this. You had no-one in your department able to pick this up. You looked like you were on the back foot after the Mumbai announcement and you were in crisis mode," said Mr Wright.

Mr Javid said it might have been a good photo opportunity to turn up in Mumbai on March 29, but it would have been too late by then.

"A photo opportunity would not have helped the workers. What has helped is the work we have done since."

But Mr Javid said that with the benefit of hindsight he would have been in Mumbai at the time of the board meeting last month.

Mr Javid said the situation was different with the closure of the SSI plant in Redcar because no potential buyers had come forward with a viable plan.

Mr Wright, who is Labour MP for Hartlepool, told the minister: "The fact that mothballing for a future potential owner was not considered is an absolute tragedy.

"We have lost these skills forever. It is an absolute disgrace that was allowed to happen on your watch.

"We have lost a valuable asset."

Mr Javid said it was easy to make demands on the Government or make statements such as the one from the chairman about SSI, but ministers had to deal with realities.

"There might be state aid rules or taxpayers' funds being spent properly - we have to deal with the facts presented to us."

He told the committee he was doing everything in his power to help a successful sale of Tata's business, but stressed he could not change the price of steel globally.

As the two-and-a-half-hour hearing neared its end, Mr Javid told MPs: "This is a big economic challenge for the country. I don't want to live in a country where we have to import all our steel.

"For the thousands of steelworkers and their families and friends affected by this, the message is that we are doing everything we can."

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