More than 700 employees of Tata Steel’s Rotherham plant in Yorkshire will be made redundant as the strong pound and high electricity prices affect business.
The company said today it will work with unions and employees to redeploy workers and minimise the number of compulsory redundancies. Overall 720 positions have been identified to be possibly cut.
"I realise how distressing this news will be for all those affected, but I am also extremely aware of our responsibility towards the ongoing survival of this business which will continue to employ about 1,500 people in South Yorkshire," said Karl Koehler, chief executive of Tata Steel's European operations.
Tata Steel, Europe’s second largest steel maker, has been facing intense competition in the UK market from foreign importers benefiting from cheaper electricity and beneficial exchange rates.
The company said it had invested more than £20m into its speciality steels business in recent years in order to create an improved range and quality of products and services but was let down by the UK government. Koehler said that as long as electricity prices in the UK were twice as high as elsewhere in Europe, the manufacturing industry will struggle without government support.
"Energy is one of our largest costs at our speciality and bar business and we are disadvantaged by the UK's cripplingly high electricity costs,” he said.
"And while the UK Government announced helpful measures to reduce the impact of its high energy taxes a few years ago, these measures still haven't been introduced.”
According to the firm, lack of government support makes the UK a less attractive place to invest and makes its industry less competitive internationally.
“Foundation industries like ours urgently need a competitive business environment and a government willing to strengthen UK manufacturing supply chains,” Koehler added.
Responding to Tata's announcement, Prime Minister David Cameron's official spokeswoman said: "We are committed to doing all we can to keeping energy prices down for consumers and businesses.
"That was one of the reasons why under the last parliament we took steps, and the Competition and Markets Authority came out with their report last week looking at that.”
Union representatives said the announcement is a major blow to Tata Steel workers who have already been through several rounds of restructuring in recent years.
"It will be natural for workers to be sceptical about this plan too, as commitments given by the same management team in previous restructurings have not been delivered,” said Roy Rickhuss, general secretary of trade union Community.
"We will give our members every support in the coming weeks and months and will oppose any compulsory redundancies."
Rickhaus also said the union will invite independent experts to analyse Tata Steel’s proposal and look at alternative solutions that could help save jobs and create a sustainable business. He also called for the government to take action to help the industry, which he described as ‘in a perilous state’.
"We have been saying for years that uncompetitive UK energy costs are damaging the UK steel industry," he added.
Today's announcement comes a month after plans for a strike by thousands of workers at Tata Steel, at sites around the country - in a long-running row over pensions - were suspended.
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