India’s Tata Steel wants to sell Britain’s biggest steelmaker, putting thousands of jobs at risk and forcing the government to seek a solution ahead of an EU referendum dominated by concerns about the economy.
After a lengthy board meeting in Mumbai, Tata Steel said it would end its almost decade-long venture in Britain – birthplace of the modern steel industry – and leave the country entirely.
Hit by falling prices, high costs and cheap Chinese competition, Tata said its financial performance in Britain had worsened sharply in recent months and it would exit as soon as it could.
The move could have an impact on Britain’s closely fought June 23 vote over whether to stay in the European Union. Britain’s anti-EU media have blamed Brussels for preventing London from taking greater steps to protect the industry, although supporters of membership say EU policy is not responsible for the industry’s plight.
The British government and the Welsh authorities said they were looking at all options to protect the steel industry, which has already shed thousands of jobs in just the last year.
“We are, and have, and continue to look at all options, and I mean all options,” Anna Soubry, a minister for business, told BBC radio, adding that she would not rule out the government buying the plants until a new owner could be found.
Tata employs about 15,000 people in Britain at sites including the giant Port Talbot plant in Wales, which is losing around 1mn pounds a day according to the BBC.
Steelmakers in Britain pay some of the highest energy costs and green taxes in the world, which, along with cheap Chinese steel imports mean it could be hard to find a buyer.
Analysts said Tata would likely struggle to find a buyer for the entire UK division but could try to sell it in parts. The sale ramps up pressure on Prime Minister David Cameron’s right-leaning Conservative government, which has sought to cultivate closer ties with China.
His fate already hangs in the balance over Britain’s future in the European Union, and his government has sought to avoid controversies during the run-up to the vote.
However the Conservatives are resented in Britain’s industrial heartlands for the demise of mining and manufacturing under former prime minister Margaret Thatcher in the 1980s.
A vital part of the economy through the 19th and 20th centuries, many of Britain’s former steel towns have been decimated by the industry’s decline since its peak in the 1970s.
Port Talbot still employs about 4,000 people, and Tata is one of the most significant private companies in Wales.
Cameron’s government has said it is taking measures to help the steel sector but the fundamental problem remains the collapse in the price of steel, caused by overcapacity in China. Tata Steel’s problems in Britain arose almost as soon as it entered the country, with the acquisition of Anglo-Dutch steelmaker Corus in 2007.
Industry bankers said Tata had overpaid for Corus when it bought at peak market conditions. Despite heavy investment and a move up the value chain, Tata Steel struggled to compete.
Britain imported 826,000 tonnes of Chinese steel in 2015, up from 361,000 two years earlier, according to the International Steel Statistic Bureau. EU diplomats say that Britain tends to vote against anti-dumping duties due to its free trade approach.
Tata Steel is the second-largest steel producer in Europe. It has a crude steel production capacity of over 18mn tonnes per annum in Europe, but only 14mn is operational.
Two of its three main European units, Port Talbot and Scunthorpe, are in Britain, with the remaining operations in the Netherlands.
Its share price has halved in the past five years, a period in which it recorded asset impairment of more than $2.88bn related to the UK business.
British unions welcomed the decision not to shutter the British plants but called on Tata to be a “responsible seller” and on the government to play its role.
“We don’t just want more warm words. We want a detailed plan of action to find buyers and build confidence in potential investors in UK steel,” Roy Rickhuss, general secretary of steelworkers’ trade union Community, said.
The leader of the opposition Labour party, Jeremy Corbyn, called on the government to take a public stake in the industry which he called “the cornerstone of our manufacturing sector”.
News of the sale prompted talk amongst industry analysts and bankers of a wider consolidation of the European steel sector.
Tata said it was still in talks with investment firm Greybull Capital over the sale of its British long products unit, which makes steel for use in construction. A source close to Greybull said they were unlikely to be interested in the new assets coming to market however.