Several bidders for Tata Steel’s British operations are close to abandoning talks with their Indian owner as the outcome of the EU referendum threatens to deepen the crisis enveloping the UK’s biggest steel producer.
The Social Magazine has learnt that the billionaire tycoon Wilbur Ross, who is among seven bidders shortlisted for Tata Steel’s UK business, has signalled that exiting the EU would diminish the prospects of him pursuing a takeover.
A number of other prospective buyers are understood to have similar concerns about the potential impact of Brexit on global demand for steel, the robustness of new trade deals negotiated by the Government, and the ability to sell steel produced in the UK in the European single market.
“Wilbur has been reasonably open that this deal is far less attractive if Brexit happens,” said a person who has discussed the Tata Steel situation with Mr Ross.
Sources said this weekend that Tata Steel, which employs roughly 11,000 people in the UK, had raised the possibility of putting its British business into some form of liquidation, although they added that no decisions had been taken.
The company owns the vast Port Talbot steelworks in South Wales as well as smaller sites across the country.
The remaining bidders for Tata Steel’s UK operations have been told by advisers to the company that they will be updated early next week on its intentions, according to a person close to the situation.
Prior to the referendum, Tata Steel had indicated to the Government that it was leaning towards retaining the bulk of its UK business, aided by a support package comprising an equity injection, loans and a possible restructuring of the British Steel Pension Scheme.
However, the vote to leave the EU has made that outcome less likely, a source said.
If Tata Steel did elect to walk away from its British operations – and found it impossible to sell them – the decision would escalate the industrial crisis confronting a key manufacturing sector as well as the political crisis facing Sajid Javid, the Business Secretary.
Sources said they doubted that Mr Javid now had the political clout to push through the legislative changes needed to restructure the steelworkers’ pension scheme, particularly after strong objections raised by the Pension Protection Fund.
In trading in Mumbai on Friday, soon after the result of the UK’s referendum on EU membership was confirmed, Tata Steel shares closed down nearly 6.5%.
It remains possible that the Indian group’s board will still be able to secure a buyer for its British operations, with other parties including the management of the Port Talbot site and JSW Steel, another Indian company, assembling offers.
Mr Ross has joined forces to bid for Tata Steel’s operations with Endless, a firm which specialises in reviving struggling businesses.
“Decisions by the UK electorate will always be respected by Tata Steel,” a company spokesman said.
“Whatever the political framework, we are committed to developing the best prospects possible for our UK operations.”
Earlier this week, The Social Magazine revealed that Tata Steel was courting buyers for two British units employing nearly 2,000 people, fuelling speculation that the Indian-owned company could retain the bulk of its UK business under a deal with the Government.
Tata’s speciality steels division and its pipeline tube operations – which operate at sites in Hartlepool, Rotherham and Stocksbridge near Sheffield – have been put up for sale independently of the wider auction.