Tatas mull exit from UK steel business on lack of government support

Tata Sons is considering Tata Steel's exit from its UK operations because of the absence of support from the British government for transition to green energy

The UK government is unlikely to provide a 1.5 billion pound subsidy package to Tata Sons for the anticipated switch to green energy, the Economic Times reported. As a result, Tata Sons is considering exiting Tata Steel's UK operations. 

According to Tata Sons, in order to keep the factory running, it will be necessary to replace the carbon-intensive blast furnaces with electric arc furnaces over the next few years. Tata Sons doesn't see much use in waiting interminably for assistance from the UK government, which is "sitting on the fence" and is looking at various exit options, sources told ET.

The Tata Group has significant business presence in the UK for many years with its Port Talbot plant having a capacity to produce five million tonnes of steel a year. It has been vocal about the need for support from the government to remain viable. 

An executive privy of the development said to ET, “Exiting businesses which are also supporting local communities have never been our group philosophy, but it has to be acknowledged and supported by the government too.”

The executive further said that high operating costs are a matter of concern and the company has been in discussion over the last two years and there should have a resolution to this concern already. “The only other option is closure of sites,” said the executive. 

According to a spokesperson of Tata Steel, the company was still in “active and detailed discussions with the UK government.” While responding to queries from ET, the spokesperson said that Tata Steel is seeking support from the UK government in two forms- first, at the policy level, by encouraging the transition to green steel and ensuring a cost-competitive landscape; second, through collaboration in the financing of the project, given the magnitude of investment and the financially stilted position of Tata Steel’s UK business. The spokesperson further informed that it is not currently in any discussions with potential buyers for the UK business.