Thousands of British steel jobs could be saved after managers at Tata’s UK steel unit stepped up ambitious plans to buy the business from its Indian parent.
Bosses led by Stuart Wilkie, who heads Tata’s strip steel business in Britan, called in staff on Tuesday to brief them about a possible management buyout.
The scheme – first reported in the Daily Telegraph a fortnight ago – is thought involve securing the financial muscle of a major investor to back the plans.
The buyout is understood to want to revive the turnaround plan rejected by Tata’s board in India last month, throwing into jeopardy the jobs 11,000 direct employees and at least 20,000 more in the company’s supply chain.
Tata put the UK steel business up for sale having balked at the prospect of having to inject £100m into the business immediately – with more cash likely to be needed later. The company’s UK steel business, which is based around the Port Talbot steelworks in Wales, has been losing £1m a day for the past year.
People with knowledge of the turnaround plan – known as “the Bridge” – said it was originally scheduled to take two years before it returned the business to profit. Managers in the UK saw this as an ambitious but achieveable target.
However, the timeframe was cut to just a year when it was presented to the board in India – seen as an impossibly short time to return to the black – and this was one of the reasons Tata’s bosses refused to support it.
The management buyout is understood to have returned to a more realistic timeframe. Under the Bridge’s plans, Port Talbot’s blast furnaces – which employ more than half of the 3,000 staff there – would also be retained. Backing this could be politically attractive to the Government, as it would mean the UK’s ability to make steel would be remain intact, as well as saving more jobs.
The Government has pledged to do it “all it can” to help Tata find a buyer for the business. Business Secretary Sajid Javid has said although the Government is limited by state aid rules meaning support would have to be on commercial terms, it would consider “co-investing” with a buyer. Finding the financial backing needed to carry out the buyout could be difficult for the Tata bosses but if the Government supported them it could deliver a political win.