New York, March 30, 2016: After a press release by Tata group in which it noted ‘the deteriorating financial performance of the UK subsidiary’ in the past twelve months, it got reassurance from the UK and Welsh governments.
The Tata’s press release said that the Tata Steel Board, with regards to the UK business, has advised the Board of its European holding company i.e. Tata Steel Europe, to explore all options for portfolio restructuring including the potential divestment of Tata Steel UK, in whole or in parts. Given the severity of the funding requirement in the foreseeable future, the Tata Steel Europe Board will be advised to evaluate and implement the most feasible option in a time bound manner.
After the statement by the Tata group, a joint statement has been issued by the UK and Welsh Governments that assures the conglomerate of support:
“This is a difficult time for workers in Port Talbot and across the UK. During the review process, we remain committed to working with Tata and the unions on a long term sustainable future for British steel making.
Both the Welsh and UK governments are working tirelessly to look at all viable options to keep a strong British steel industry at the heart of our manufacturing base.”
Tata Steel UK has been facing a lot of problems due to muted demand in Europe following the financial crisis of 2008 and in the press release has stated that the trading conditions in the UK and Europe have rapidly deteriorated more recently, due to structural factors including global oversupply of steel, significant increase in third country exports into Europe, high manufacturing costs, continued weakness in domestic market demand in steel and a volatile currency.
It also said that these factors are likely to continue into the future and have significantly impacted the long term competitive position of the UK operations in spite of several initiatives undertaken by the management and the workers of the business in recent years.
The business house noted that even under these market conditions, the Tata Steel Group extended substantial financial support to the UK business and suffered asset impairment of more than £ 2 billion in the last 5 years.
The Tata Steel Board also said that it reviewed the proposed restructuring and transformation plan for Strip Products UK, prepared by its European subsidiary and said that the Tata Steel Board came to a ‘unanimous conclusion’ that the Plan is unaffordable, requires material funding support in the next two years in addition to significant capital commitments over the long term, the assumptions behind it are inherently very risky, and its likelihood of delivery is highly uncertain. It, therefore, said that it would not be able to support the investment necessary to proceed with the proposed Strip Products UK Transformation plan.
The Company also said that it has been in deep engagement with the UK Government in recent months seeking its support to achieve the best possible outcome for the UK business and that these discussions are ongoing and will continue. It further said that the discussions will also continue with Greybull in relation to a sale of the UK Long Products business and that the UK Government is also involved in the latter discussions.
