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Tata Board meets to discuss UK Steel

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This is the official Tata logo as issued by Group Communications in August 2010.

The Board of Tata Steel is going to meet in India to discuss the future of its UK steel operations.

Expectation

The Tata Steel is expected to “pause ” its sale of the main Port Talbot plant, but go ahead with the sale of its specialty business which employs 2,000 people in Hartlepool, Rotherham and Stocksbridge. Though Tata is in no hurry to sell because of the rising steel prices and also because of the government aid that they are getting. Business Secretary Sajid Javid is in Mumbai to talk with the company. During his trip Mr Javid will also meet the government officials in Delhi to discuss about the trading relationship between India and UK outside the European Union.

The Reason of Delay behind the selling of Tata’s UK business

  • Tata, as expected, is delaying its sale of the UK business as they are considering the options and assessing the impact of UK’s decision to leave the European Union.
  • Another obstacle to the sale of the UK business is the legacy of the British Steel Pension fund which Tata inherited when it bought the business in 2007. It has 130,000 members and a deficit of £700m.

Government Aid

  • The government has been trying to help by consulting on drawing up methods for special legislation to lower pension benefits for many of the 130,000 members of the old British Steel pension fund.
  • It has offered hundreds of millions of pounds worth of loans and the taking of a potential 25% stake in the business.

 

The Pressure on Tata Steel has decreased

With the increase in the price of Steel, the pressure on Tata Steel to sell their share has decreased. But this delay will only provide a short term relief to the work force. One potential bidder fears the UK business will “wither on the vine” while Tata refocuses its investment on its plants within the EU.

German engineering group Thyssen Krupp and Tata have had discussions about combining their continental European steel operations, as global overcapacity has a tendency of weighing down over prices and profits.

 

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