Tata Steel to Sell Its British Operation
Tata Steel has announced to put its British operation on sale on Tuesday. This gives a blow to British steel industry as thousands of jobs are at stake.
Tata Steel said it will not tolerate anymore losses in Port Talbot and other British plants, as it faces a daily loss of £1 million ($1.4 million). On Tuesday Tata Steel announced its decision to sell its British operation. About 15,000 jobs are at risk if the largest steel plant in UK is closed, and it will also affect 25,000 others that related to its supply chain.
According to the company's source as reported by The Guardian, Tata has been searching for potential buyer for its steel plants in the last 18 months. However, there were no candidates that wanted to take over the business. As it would require billions of poundsterling to bring back the plant in business.
Tata will no longer tolerate its loss with surmounted to billion poundsterling. Group Executive Director of Tata Steel Koushik Chatterjee told BBC that Tata wanted to move quickly to secure the sale in order to cut its losses in the UK. Within five years, Tata Steel had lost £2 billion ($2.8 billion) in its UK operation.
"It has become quite a burden for the company. It is not a valuation exercise, it is an exposure exercise. The view the board took finally was we can't sustain this kind of exposure. So it's not about the bid being low or high. It's about some one being willing to buy the business," Mr Chatterjee said.
Pension costs are the huge problem for the company as the source said Tata reported that it faced a £2 billion ($2.8 billion) pension deficit in the UK last year. While according to latest account The British Steel Pension Scheme has liabilities of £14.5 billion ($20.8 billion), in which the trustees would like to speak with Tata regarding the implication of the potential divestment of Tata Steel in Port Talbot.
New York Times reported that in order to deal with crisis, Prime Minister David Cameron cut short his vacation in Lanzarote. Business Secretary Sajid Javid also hurried back to England from his Australian trip.
Meanwhile, Tata Steel Europe that manages the company's European steel operation has received instruction from headquarter to explore all possible options to restructure its steel operation in UK. Beside its Port Talbot steelworks, Tata also operated plants in Rotherham, Corby and Shotton. Recently, Tata has reached a deal to divest its Scunthorpe plant and two other plants in Scotland.
Following continuing loss, Tata Steel decided to sell its British steel operation. This leaves thousands of jobs to be at risk as the company's largest steel plants in Port Talbot employs 15,000 workers.