LONDON: The UK government has secured a "reprieve" from Tata Steel to save thousands of jobs at its loss-making Port Talbot steelworks in Wales, UK business secretary Sajid Javid told the Parliament today.
"Tata contacted me several weeks ago to warn they were planning to sell parts of their business but they were planning immediate closure of their Port Talbot site. Thanks to the groundwork laid by my team... we were able to secure a reprieve while a buyer is being found," Javid told the House of Commons during an emergency debate on the ongoing steel industry crisis in the country.
"Investors know British steel is the best in the world, British steelworkers are the best in the world, and the government stands with the industry," he said, a day after he told Parliament that the UK government would weigh up a "co-investment" or part-nationalisation of the Port Talbot plant in an attempt to save the nearly 4,000 jobs.
Today's debate had been called by UK shadow business secretary Angela Eagle, who warned that Tata’s exit from the UK would cost the UK economy at large.
She said: "Much has been said about the cost of supporting our steel industry, but far too little has been said about the cost of letting it be destroyed. In Rotherham alone Tata is the biggest single business rates payer at 3.2 million pounds a year– worth an 1.8 per cent council tax rise.
"The loss of the steel industry would worsen our record- breaking trade deficit which is already at its worst since 1948."
On Monday, Tata and UK-based investment firm Greybull Capital had announced an agreement on the purchase of the Indian steel major's Long Products Europe (LPE) division based at Scunthorpe, in the east of England.
The transaction included the LPE steel works in Scunthorpe, two mills in Teesside, an engineering workshop in Workington and a design consultancy in York along with a mill in Hayange, France, being sold for a nominal 1 pound to Greybull.
It also marked the revival of the brand name British Steel once the deal is complete in about eight weeks time.
As part of the deal, Greybull is arranging a 400 million pound investment and financing package for the new business.
The financing, provided principally by a combination of banks and shareholders, will be available to fund working capital and future investments.
Greybull partner Marc Meyohas said: "We are delighted to have reached agreement for the acquisition of LPE, which we believe can become a strong business, with a highly skilled workforce and great potential.
"I would personally like to thank Tata Steel, the trade unions and the British and French governments for their support, which was essential in ensuring the agreement. We are now focused on taking the deal to completion in order that the business can start its next chapter with confidence."
The Long Products Europe business employs 4,800 people – 4,400 in the UK and 400 in France.
Bimlendra Jha, Tata Steel executive chairman of the stand-alone LPE business, said: "This sale is the best possible outcome for employees who have worked relentlessly to ensure the business' survival, and helped to make it attractive to a potential buyer."
Trade union officials at Unite said proposals for a turnaround of the LPE division include a one-year pay cut of 3 per cent and changes to pension scheme, proposals which had already been put in place by Tata before it agreed the sale.
"For a couple of years now, the Long Products business has been in limbo. We knew we were living on borrowed time. That air of uncertainty has been there for so long that this announcement is just such a relief. We’ve got a good chance now of a successful future," said a Unite representative.
Roy Rickhuss, general secretary of Community trade union, added: "Community’s independent experts, Syndex, have assessed that the transformation plan for the business is robust and Greybull has the necessary capabilities to build a sustainable business.
"The deal alone will be a huge boost to the UK steel industry but more government action to support our industry will be needed to ensure its sustainable long-term future."
Meanwhile, negotiations on the Port Talbot plant continued with Indian-origin businessman Sanjeev Gupta among the frontrunners to acquire the steelworks for his family firm Liberty House.
Tata Steel has reportedly prepared an information memorandum (IM) for possible buyers.
It will then pass on expressions of interest to its M&A team, who will sift through to decide on a shortlist.