More job losses in Tata Steel’s UK plants?

More job losses in Tata Steel’s UK plants?

A MANAGEMENT buyout of Tata Steel’s UK operations would lead to 1,000 more job losses, the bid team has admitted.

Excalibur Steel is discussing its buyout plan with one British and three international banks, reports The Guardian newspaper.

Before the meetings, the Tata UK executive Stuart Wilkie, who leads the group, expressed hope that by the end of next week it will have “secured necessary lines of finance”.

The group’s turnaround plan includes an additional 1,000 job losses across the UK, on top of 1,000 redundancies being made by Tata, which were announced before the business was up for sale.

A spokesman for Excalibur said: “The Excalibur proposal is to acquire all Tata’s steel assets in the UK. In the event of our proposal being successful, the package of redundancies would affect those facilities we have acquired.”

The group wants to raise more than £300m, a funding package made up of debt and equity. Under its plans, employees would own 10% of the business, including those in the management buyout team.

Wilkie said he expected the UK government to honour its pledge to provide up to 25% in funding. “All the discussions we’ve had with government are in line with that.”

Wilkie added that efficiencies achieved since last year, when the company was losing about £1m a day, had reduced losses to a quarter of those levels. “That’s significantly better than what was in the [turnaround] plan,” he said.

Excalibur has emerged as the frontrunner to rescue Tata Steel UK, although concerns about funding and pensions remain.

Tata’s sizable pension obligations could prove a sticking point for any party wanting to take on the business. Wilkie said: “If the liability for the pension was on the table, then everybody would walk away.”

The existing pension scheme does not feature in Excalibur’s negotiations, but it would start a new pension scheme.

Meanwhile, Liberty has bolstered its bid team with the appointment of Prof Julian Allwood, the Cambridge professor who has drawn up a plan to save Britain’s steel industry. Allwood advocates making high-value products from recycled steel for the aerospace and car industries.

Gupta, Liberty’s executive chairman, said: “The conclusions of the Cambridge team match our own industry analysis and our green steel strategy very closely and we believe their work will be hugely valuable to us in developing and refining our business model for the sector.”

Liberty argues that making liquid steel from scrap involves half the cost and a third of the carbon footprint of the blast furnace method, and could save many thousands of jobs in the UK.

However, Gupta added: “While we firmly believe the future of UK steel is in recycling, we are very conscious th‎at we need to protect the high-end customer base in automotive and other applications, so we will work with them to forge a transition plan that meets their expectations.”

The final report from Allwood’s team, drawn from six years of government-funded research, concluded that the world has more blast furnaces than it will ever need.

To be able to compete with China’s modern factories, and India’s likely investment in new blast furnaces, the UK should switch to making liquid steel from domestic scrap, most of which is currently exported for melting abroad, the report said. It found that the supply of UK scrap is projected to double to 20m tonnes a year over the next 10-15 years.

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