The New Worker
The Weekly paper of the New Communist Party of Britain
Week commencing 1st July 2016
THE SUDDEN fall in the value of the pound sterling following the Brexit vote has caused Tata Steel to reconsider its decision in March to announce the closure of its plant at Port Talbot in South Wales.
Another factor in Tata’s decision to reconsider is a move from the Government to guarantee the company’s pension fund.
The latest figures show the deficit has grown to £700 million, up from £485 million last year, and its liabilities are almost £15 billion. Under the Government’s plan, drawn up with trustees and trade unions, the scheme would be spun off into a new “shell”.
Tata Steel is now close to a deal to save the Port Talbot plant because the fall in sterling has improved the industry’s survival prospects.
MPs and trade unions had feared the steel industry could face a new crisis after the referendum result, with bidders for Tata Steel UK ready to pull out of the process, according to reports.
But sources familiar with Tata Steel’s thinking say that the company is still working on a deal with the Government to keep its British business and that the slump in sterling’s value could help the industry.
More than 11,000 jobs have been at risk after Tata Steel announced in March that it was considering pulling out of its UK business, which includes the Port Talbot steelworks in south Wales.
The company began a sales process for the business and seven potential bidders were shortlisted, but it has decided to work on a deal to keep its UK concern after the Government pledged to offer hundreds of millions of pounds of support and restructure the company’s pension scheme.
A senior source close to the Indian company said: “Unless something drastic happens, then early next week they will make a statement.”
The company believes the impact of Britain voting to leave the European Union (EU), which threatens to spark years of uncertainty for businesses, could be softened by the weakening of sterling. The pound fell to its lowest levels in 30 years against the dollar on Friday, which means it will be more expensive for China to export steel to Britain.
Cheap imports from China have been one of the factors behind the crisis facing the steel industry. It is understood, however, that Tata Steel’s main concern is whether the government will be strong enough to push through changes to the British Steel pension scheme, which would need to be enshrined in law.
The pension protection fund and some MPs, however, have said that this could create a dangerous precedent and encourage other companies to walk away from their pension liabilities.
A spokesperson for Tata Steel said that the company was “committed to developing the best prospects possible for our UK operations”.
“Decisions by the UK electorate will always be respected by Tata Steel. Whatever the political framework, we are committed to developing the best prospects possible for our UK operations,” he said.
Gareth Stace, the director of the trade body UK Steel, has said the steel industry faces its biggest ever challenge because of the referendum result. He said: “The decision to leave the European Union will send shock-waves 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.”
He added: “It is now more essential than ever to create the right business conditions in the UK that allow the steel industry to survive, invest and thrive. This will ensure that our vital supply chains, such as defence, automotive and construction, can rely on the production of steel in the UK so we are self-sufficient and can never be left at the mercy of others.
“Government now needs to fully and finally tackle head-on the uncompetitive electricity and policy costs that have historically hindered the growth of steel producers and seen thousands of high-skilled jobs lost over the last year.
“Government can now match words with actions and take the lead in dealing with subsidised exports, most notably from China, that are slowly destroying steel-making in the UK.”