THE sale of Tata’s UK steel business is being held up by the Indian parent company insisting any buyer has to take on a near £1bn loan.
It has emerged that a condition of any sale by the Indian company of its UK steel business, which directly employs 11,000 and was put up for sale in March, includes responsibility for an inter-company loan from the Mumbai parent company to Tata Steel UK of £900m.
Any buyer would be unlikely to agree to such a liability and some would also want assurances from Tata on any future costs in the eventuality of any plant closures which are also not part of any agreement. This could see bidders looking to acquire just the plant and machinery in the business and not a transfer of existing share equity.
Last Wednesday there was an announcement of a short list of bidders, just days after last Monday’s deadline for submitted final bids. It was hoped that there would be an announcement concerning future costs by last Friday. Last week, the Tory government started a four-week consultation on the £700m in deficit British Steel Pension Scheme, with four options outlined.
Bidders Excalibur Steel and Liberty Steel have already stated they would not be prepared to take on the current defined pension scheme for 130,000 members.
The British Steel pension scheme has 130,000 members and a black hole deficit of £485m.
The option that the government is considering is to base the scheme’s annual increase on the Consumer Prices Index (CPI) inflation measure, rather than the Retail Prices Index (RPI) measure currently used.
This will represent a massive £2 billion cut to the steel workers’ pensions. Considering the bulk of British pension schemes have black holes, there are growing fears that legislation will be rolled out to apply to any other company pensions schemes that reach a crisis point.
Making a statement to parliament on the steel industry, Javid told the House of Commons: ‘What we can do is listen to Tata, listen to the bidders and work with everyone involved to remove potential barriers to a sale.
Speaking on Radio Wales’ Sunday Supplement programme, Aberavon MP Stephen Kinnock said Tata would need to give guarantees it is in the UK steel industry for the long run if it scraps its planned sale of plants. He said: ‘If they do want to stay we would welcome that in principle.’
Kinnock added: ‘But I would also say in practice steelworkers in my constituency, their families and communities around them have been through hell in the last few years and certainly since March when the sale was announced. I think they’ll be forgiven for treating any news that Tata is staying on board with a degree of scepticism and even anger. We would need guarantees so that in 12 to 24 months we are not back to square one.’
