Fate of Tata’s UK steel business hinges on government support – ET Infra

The fate of Tata Steel‘s UK business hangs in the balance as talks continue with the Rishi Sunak government over the quantum of government support, said people with knowledge of the matter.

To be sure, the British Prime Minister has assured Tata group that the government will sweeten its earlier subsidy offer to modernise and decarbonise the company’s Port Talbot plant, executives close to the development said.

However, as a contingency, an exit plan is also being drawn up in case the talks fail, the people cited said.

Sunak spoke to Tata Sons chairman N Chandrasekaran as recently as last week, when he visited the UK to announce the group’s plan to set up a giga factory to make batteries for electric vehicles.

A proposed meeting in September between Chandrasekaran and the Tory Prime Minister will decide the UK steel plant’s fate, said the people cited above. If the two sides fail to reach an agreement in the next two months or so, the exit plan will be implemented, they said.

It was globally reported in January that Tata Steel, which owns the UK’s largest steelworks at Port Talbot, will receive around 300 million to make electric arc furnaces at its UK operations. While Tata Steel has not confirmed the sum, it had stated that the amount promised is too little. Since then, there has been no significant progress in discussions between the Sunak government and Tata Steel, officials aware of the development said.

Tata Steel executive director and chief financial officer Koushik Chatterjee has been tasked with drawing up the exit plan, according to them.

Softening the Blow
The plan will take into account the impact that Tata Steel’s exit from the UK could have on all stakeholders, including employees and unions, they added.

Tata Sons’ move to set up the 4 billion pounds giga factory in the UK after earlier shortlisting Spain is also seen as a possible bid to soften the impact if it has to exit the steel business despite the long wait to secure adequate financial support from the government.

“Setting up a giga factory first makes business sense to the group to meet JLR (Jaguar Land Rover) battery requirements for its electric vehicles,” said a group executive aware of UK developments. “But yes, it would also show the group’s commitment to the community there, in terms of jobs created in lieu of any decision to truncate the steel business.”

Tata Steel has maintained that the Port Talbot plant doesn’t generate enough profit to justify fresh investments for replacing its two blast furnaces, which are nearing the end of their operational life. The high-emission blast furnaces are proposed to be replaced by less carbon-intensive electric arc furnaces in line with the UK’s decarbonisation goals. The island nation has pledged to achieve net zero greenhouse gas emissions by 2050.

  • Published On Jul 24, 2023 at 11:10 AM IST

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