Brexit decision piles pressure on Tata British steelworks
Fri Jun 24 2016
Rajesh Sharma (2003 articles)

Brexit decision piles pressure on Tata British steelworks

LONDON Tata Steel’s Port Talbot plant has moved a step closer to closure following Britain’s decision to leave the European Union, but buyers remain interested, industry sources said on Friday.


Liberty House, management buy-out vehicle Excalibur Steel Limited and up to five other entities entered bids for Tata Steel’s British operations, which employ around 11,000 people.

But the sources said the combination of a possible merger between Tata and Germany’s Thyssenkrupp’s and uncertainty following Britain’s referendum vote raised the chances Tata would close its biggest British plant.

Speaking on condition of anonymity, one industry source said a German merger, repeatedly reported in the German press, would make Port Talbot “vulnerable straight away”.

“The second thing is we’ve had a Brexit and the prime minister is going to step down,” he said, adding that put another “question mark over Tata’s future involvement here.”

Industrial sources have already said the logical step would be to focus on Tata’s other European operations, which have managed a profit despite difficult conditions.

That concern is greater following Brexit, the sources said, and raised the risk Tata would close the Welsh plant.

“Would they want to sell their assets to someone else as opposed to supplying the UK market from their own European operations?” one source asked.

Thyssenkrupp’s works council chief on Friday said he was not aware of any agreement in principle to merge its European business with Tata.

A Tata Steel spokesman in Britain declined to comment on what he said was speculation.

In a statement from India on Friday, Tata said access to markets and a skilled workforce would remain important considerations for its businesses in Britain.

“Each company continuously reviews its strategy and operations in the light of developments, and will continue to do so,” the spokesman said.

Tata has 19 independent companies in Britain, including luxury carmaker Jaguar Land Rover and steel plants.

Both the auto sector and the construction industry, which the steel industry supplies, are highly vulnerable to the economic fallout of market volatility and a drop in the pound’s value, analysts say.

Tata’s shares fell 6.4 percent on Friday and Tata Motors, which owns Jaguar Land Rover, fell nearly 8 percent.

Gareth Stace, director of industry body UK Steel, said the Brexit decision would be a major shock that argued for all major projects to use British steel.

“The decision to leave the European Union will send shockwaves across the UK’s steel industry. Our sector is well versed in having challenges thrust upon it, but it’s clear that this is like no other,” Gareth Stace, Director of UK Steel, said.

Britain is among the countries that have delayed reforms put forward in Brussels to strengthen EU trade defences and help the steel industry.

Eurosceptic media have blamed Brussels for preventing London from taking greater steps to protect the industry while the opposition Labour Party called on British Prime Minister David Cameron to do more to save the plants.

Neath Port Talbot, home to Tata’s biggest steelworks, supported Brexit by 57 per cent, more than the nation as a whole.

Analysts say any government would be expected to do everything possible to avoid the closure of a plant the size of Port Talbot. A rule of thumb is that for every one job in the steel industry, four further jobs are created in related industries.

Rajesh Sharma

Rajesh Sharma

Rajesh Sharma is Correspondent for Stock Market of South East Asia based in Mumbai. He has been covering Asian markets for more than 5 years.