The sale of Tata Steel’s UK assets will commence next week as first potential buyers come forward, but more time is needed to ensure a smooth transition, said Business Secretary Sajid Javid.
Speaking after a two-hour meeting with Tata officials in Mumbai, Javid reassured the unions that Tata will allow sufficient time for the sale to proceed to minimise the impact on jobs.
He also revealed that a number of prospective buyers have already come forward but added that the government would like to see more before the formal process begins.
Union representatives welcomed Javid’s announcement of Tata’s willingness to provide time for a new commercial operator to be found.
"Tata has made it clear that they want to make this process as swift as possible and while we welcome their commitment to be a responsible seller, we now need to focus on how this industry is safeguarded for the future,” said Harish Patel, Unite national officer for manufacturing.
"We are extremely concerned that this uncertainty will have wider ramifications. We also want to discuss the supply chain implications, where Unite has thousands of members who also face an uncertain future, so we will be seeking further urgent discussions with the minister on his return."
One of the first to express interest in Tata’s struggling business was Sanjeev Gupta, head of gas and maintenance services and renewable energy company the Liberty Group. Liberty Group previously acquired a mothballed steel plant in Newport, south Wales, as well as several Tata mills in Scotland.
"UK Government appears highly supportive and is proactively engaged in finding a long-term solution,” Gupta said. “We have also actively engaged with Welsh Government and again we are encouraged by their approach. The next step is for Tata to define the formal sales process and request indications of interest from potential buyers.”
However, Gupta admitted the prospect of buying Tata’s plants was somewhat "daunting" and wouldn’t be possible without the government’s support.
"It's a loss-making business and a loss-making business is not worth a lot in itself to buy," Gupta told Reuters in a phone interview. "It's more of a question of what are the resources required in turning it around."
One of the options to reduce costs, he suggested, would be using locally available scrap instead of imported iron ore as the raw material. However, he said, there will likely be an impact on employees, who would need to be retrained. He also rejected taking on pension liabilities.
"We are interested and we now need to work out a business plan," he reassured.
Tata Steel rejected a restructuring plan of its loss-making UK business on 30 March. The firm said the plan was not affordable as the business was already losing £1m a day in its UK steel operations due to the reduced demand and cheap imports from China.
The sale of Tata’s steel plant in Scunthorpe to Greybull Capital is already underway with Union members being balloted on a proposal to cut pay by three per cent for one year and reduce pensions.
Negotiations over the sale of the plant, which employs around 4,000 workers, have been taking place for several months and started long before last week's announcement.