UK government must step up response following Tata crisis, says steel boss

Sajid Javid

One of the biggest steelmakers in Britain, second in size only to Tata, has said there is no guarantee that the industry will survive if the government fails to step up its response to the current crisis.

As the business secretary, Sajid Javid, prepared to travel to Mumbai for talks with the Indian multinational, the managing director of Celsa UK, Luis Sanz, asked why the British arm of his company was paying twice as much in electricity costs and eleven times as much in business rates than its operations in France and Spain.

In an exclusive interview, Sanz argued that other European countries had a “clear industrial strategy” that recognised the importance of steel.

He criticised the UK for reacting when it faced terrible consequences rather than taking proactive measures. “In other European countries they saw these problems coming and acted in advance,” he said.

Javid will try on Tuesday to deflect criticism of his handling of the crisis as he scrambles to try to secure a deal for Tata’s loss-making British assets. The business secretary will first attend a series of meetings in the UK, including with tycoon Sanjeev Gupta, a potential buyer who has said his company, Liberty House, would only take on the project if it could avoid “mass redundancies”.

The comments may provide some reassurance to 15,000 Tata Steel workers who are concerned about losing their jobs.

Javid will also join David Cameron and the chancellor, George Osborne, for a discussion with Welsh first minister, Carwyn Jones, before a hastily arranged trip to Mumbai, in India, to discuss the unfolding situation with Tata’s chairman, Cyrus Mistry.

Cameron insisted that the government was “doing everything it can to find a long-term, viable solution to save the Port Talbot steelworks”. Speaking ahead of the meeting with Jones he said he wanted to “end the uncertainty for workers and their families”.

It was another dramatic day on Monday in the ongoing efforts to save the steel industry in Britain, in which:

  • Jones recalled the Welsh assembly and warned that the industry faced a race against time, with just two to three weeks to secure a buyer. In a television broadcast to the nation he said it would be a “strategic disaster” if the country stopped producing steel.
  • Union leaders, after meeting for the first time together since the crisis unfolded, branded the government response a “disaster” and called on Cameron to sideline the business secretary and provide answers himself.
  • Welsh economy minister, Edwina Hart, warned against “cherry picking” of Tata’s assets, as unions also raised concerns about a potential breakup of the company.
  • Whitehall sources told the Guardian that Javid had placed his business department into “full crisis mode” since returning from an official trip to Australia, which proved embarrassing when Tata announced its decision.

Within the industry there is a lot of scepticism about whether a sale will be possible given Tata’s admission that its British operations are losing £2.5m a day and are now worth virtually nothing.

Gupta admitted that it looked like a complicated deal but said he had already held “encouraging talks” with the government. He acknowledged that blast furnaces, which account for the bulk of employment at the biggest plant in Port Talbot, would be more difficult to turnaround than the rest of the UK steel industry.

But he said one option would be to reposition the workforce from blast furnaces to electric arc furnaces, telling the BBC: “I won’t undertake something which will require mass redundancies.”

It came after Jones urged the UK government to keep nationalisation on the table, warning that the steel industry “cannot be allowed to die”.

“If a buyer cannot be found within the sales period, the UK government must take the plants into public ownership until a buyer can be found,” he told the Welsh assembly.

That came alongside a fresh plea for state support after members of the Community, GMB and Unite trade unions held talks in London. They called on the government to back a plan that involves £1.5bn being invested into Tata’s operations over 10 years, with the government providing support for two to three years until the business is self-sufficient.

Tony Burke, assistant general secretary of Unite, said: “It is clear that last week the government’s eye wasn’t on the ball. It was a disaster. We have got to get the prime minister to intervene. There were more questions than answers last week. Now we are looking for answers to the questions.”

The warnings were echoed by Sanz, whose Cardiff-based Celsa UK is part of a larger company with operations across Europe including France and Spain. He said all other European countries had been more effective at cutting energy costs and driving down business rates.

He said his company had paid a “record figure” in green levies in 2015, and had yet to receive any of the promised compensation package on energy prices. Celsa UK has not yet seen a penny from a compensation package over energy prices despite a promise from Cameron in October that payments would be speeded up.

The government admitted that only 5% of payments had been made to energy intensive companies, and could not say if any money had gone to steel yet.

“We need a level playing field – we are not asking for handouts,” said Sanz, arguing that Chinese dumping was heavily distorting the market. British steel companies were being asked to compete as exporters to boost the British economy, he said, but were struggling to compete domestically because of a series of challenges.

He said the four key factors that needed urgent attention were energy costs, business rates, procurement – with more action to use British steel in public sector projects – and anti-dumping measures.

European countries were doing more in all these areas, he argued. “In these countries there is a clear industrial strategy that understands that the steel industry is a foundation industry.

“If we want 20% of GDP to come from manufacturing by 2020 – as the European commission has called – we need a strong steel sector and this has been understood by those governments.”

He said he had “huge expectations” that the government will take action and will do it quickly, “because otherwise there will be no potential interest in the steel sector in the UK in the future. We are not going to issue threats but we can’t issue guarantees either”.

Powered by Guardian.co.ukThis article was written by Anushka Asthana, Graham Ruddick and Rowena Mason, for The Guardian on Monday 4th April 2016 22.54 Europe/London

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