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Tata Steel sells Scunthorpe steel plant and invites bids for its other UK assets

11 April 2016

Tata Steel has sold its plant in Scunthorpe and several other businesses to Greybull Capital, possibly saving up to 4,400 jobs in the UK and 400 in France. Greybull will take on the entirety of Tata's steelworks operations in Scunthorpe, as well as two mills in Teesside, an engineering workshop in Workington and a design consultancy in York along with a mill in Hayange, France.

Scunthorpe steel plant - Image: Shutterstock
Scunthorpe steel plant - Image: Shutterstock

The combined operations form Tata's Long Products Europe (LPE) business. Following completion of the deal, the steelworks business will trade under the brand name British Steel. The sale also includes the associated sales and distribution network.

Greybull, which is a British-based investment group, will pay a nominal £1 for the business and has arranged a £400m investment and financing package. Staff members at Scunthorpe are currently being balloted on whether to accept a 3% cut in pay and reductions in pension contributions for a year.

Negotiations between the Indian conglomerate and Greybull over the Scunthorpe plant started nine months ago. The existing management team will stay on to run the new business.

Marc Meyohas, a partner at Greybull, said the aim was to avoid any redundancies, grow the business and become profitable within a year. The company helped turn-around the airline operator Monarch, which it bought it in 2014 and last year returned to profit, and recently acquired convenience store chain, My Local, from Morrisons.

Tata said on March 30 it would sell or close its UK assets, which are losing £1 million a day, due principally to China dumping cheap steel products on the market and high energy costs in the UK.  

The group said it was beginning the formal process of selling its UK steel assets on April 11, and had invited potential buyers to submit offers.

The only company that has so far expressed a public interest in buying other assets, including the country's biggest steel plant at Port Talbot in south Wales, is Liberty House, which is owned by UK-based entrepreneur Sanjeev Gupta.

Gupta has spoken of a desire to save jobs with the potential to remodel Port Talbot as a producer of steel through the use of electric arc furnaces - to take advantage of recycling opportunities.

But his list of concerns include high energy costs in the UK, which he has said would have to be "rectified" by the Government.

Liberty House bought the mothballed former Alphasteel works in Newport - with workers on half pay for 18 months until it was ready to reopen late last year - plus a 10% stake in the firm behind the proposed Swansea Bay tidal lagoon. He also owns Uskmouth power station near Newport.

Uskmouth generates electricity from Russian coal at the moment but plans to convert to biomass and provide renewable energy, providing power for the adjacent steelworks.
At the moment the Newport plant rolls imported steel slab and turns it into finished steel but plans in future to use an electric arc furnace to produce molten steel.

Gupta also helped save hundreds of jobs at steel firm Caparo - which included a plant in Tredegar, Blaenau Gwent.

He has also struck a deal already to buy two Scottish steel mills from Tata at Clydebridge and Dalzell in Lanarkshire, which employ 270 people. They were were part of a deal where the Scottish government will buy the plants from Tata before selling them on to Liberty House.

The fee for the plants is understood to be nominal because Liberty House will take on their environmental costs and invest in them.

The Port Talbot complex employs 4,000 and Gupta has said if he takes it over he would expect a transition over time there from blast furnaces to arc furnaces, retaining all the jobs there currently.

Steel companies in France and Germany receive assistance from their governments to reduce their electricity costs, and industry association UK Steel says this needs to happen in the UK if the country is to retain a steel industry.

Gupta has said he could increase his UK workforce from 1,500 to as much as 5,000, if the government puts in place the right conditions to allow investment in steelworks. He wants to buy old plants that once made steel from raw materials and convert them to recycle scrap steel into products for use by engineering businesses.
 


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