Tata to announce pause in search for steel buyer.
TATA is expected to confirm a pause in the sales process of its UK steel business today following a board meeting in Mumbai. With Tata Steel UK moving back into profit, having achieved an Ebitda of PS5m in May on the back a recent rise in steel prices, the main issue for Tata will be the outcome of a UK Government review into its PS700m-in-deficit British Steel Pension Scheme.
The favoured option is that legislation is enacted so that future accruals into the fund, with liabilities of PS14bn, are based on the lower inflation measure of the consumer price index, rather than the current retail price index.
Such a move, although it could lead to calls from other in-deficit defined pension funds for similar Government support, would move the pension fund into a PS1bn-plus surplus.
But the consultation only ended on the day of the referendum so it could take weeks, if not months, for the UK Government to announce its planned course of action.
The pension review is not an issue for any of the bidders as they are only seeking to acquire the plant and assets of the business and would set up a new fund for existing workers.
For unions and workers at Tata, which directly employs 6,000 in Wales and 11,000 across the UK, they will be looking for how long any 'pause' will last.
And there is also a question of at what stage a pause effectively becomes a case of Tata keeping the business.
It is understood that bidders for the business, in a sales process being overseen by KPMG, have become increasingly frustrated with Tata's handling of it.
If Tata does decide to keep the business unions and workers would also be seeking assurances that it is committed to the business, and will invest for the long-term. The last thing they would want to see is the business being under threat of closure again only a few years down the line.
Business Secretary Sajid Javid will be in Mumbai today for talks with Tata executives. However, Tata could confirm it is proceeding with plans to sell its specialist steel operations in Yorkshire.
Bidders for Tata's UK steel business include Excalibur Steel and Liberty House.
The UK Government has offered a loan of around PS300m to support any acquirers of the business as well as taking up to a 25% equity stake. This offer of support also extends to Tata if it decides to keep hold of the business.
It has also said it will continue to provide support to offset energy costs and create more favourable procurement rules for the public sector to buy more British made steel. The Welsh Government also stands ready to back any buyer, or Tata, with PS60m to ensure the future of primary steel making at Port Talbot.
Secretary of State for Wales, Alun Cairns said yesterday: "The urgency that we had some time ago has passed somewhat, partly because of the ongoing warm relationship that the UK has with the unions, with Tata and the potential investors.
"We've offered to make hundreds of millions of pounds available, we've resolved part of the power issue that Tata had. There's still more to do."
On the pension scheme he said: "We're still looking at pensions, we've had several thousand responses to the consultation we put out and that's fundamental to resolving the long term future."
Plaid Cymru Shadow Cabinet Minister for Finance and Economy Adam Price said: "In this uncertain period following the decision to withdraw from the European Union, now is the time for the Welsh Government to put maximum pressure on Tata to secure a buyer for its sites in Wales. Wales' economy has been thrown into an uncertain state, and Friday's meeting of the Tata board has now taken on a new importance.
"The Welsh Government has offered financial support to the management buy-out bid from Excalibur, and I hope that we get a positive decision in favour of this bid so that we have the best chance of securing the long-term future of the steel industry in Wales.
And Labour MP for Aberavon Stephen Kinnock said: "If reports that Tata Steel intend to pause the sale of most of its UK business, including Port Talbot, prove to be correct, then this would clearly pose more questions than it answers.
"Steel workers and their families have been put through hell over the last weeks and months, and they will be forgiven for greeting these reports with a degree of scepticism, and perhaps even an element of anger. "We all understand the massive impact of the referendum result, and we appreciate that Tata Steel, like so many other businesses, needs time to review and evaluate the implications of Brexit. However, It is now absolutely critical that Tata Steel and the UK Government come forward with a specific timetable."
The Tata steel business directly employs about 6,000 people in Wales and about 11,000 across the UK