Tata Steel, Britain's largest steelmaker, is seeking government support amid reports that it is close to securing a bailout worth hundreds of millions of pounds. According to reports, the rescue deal could help save about 8,000 jobs. The pandemic has severely affected the steel industry which was already suffering from low demand.
"We have been, and continue to, seek government support in the UK... and all geographies we operate in," Tata said. They said that "it would not be appropriate to comment on ongoing discussions with governments."
According to reports, the bailout would take the form of a loan that could be converted into equity at a later date, should Tata be unable to repay. The government said it was "in regular discussions with companies across a range of sectors". Once the bailout finalised, it would support Tata Steel's UK operations, which include its main Port Talbot plant in Wales, but also sites elsewhere in Wales, Hartlepool and Corby.
Tata has been seeking loan worth £500m, according to Stephen Kinnock, the Labour MP for Aberavon, where Port Talbot is based. The rescue loan would be the first under the government's Project Birch scheme, which is designed to save large firms that are unable to get the support they need through existing schemes.
Aviation and aerospace are reported to be among other sectors that may require "bespoke" bailouts.
Like other UK steel operators, Tata Steel has been hit hard by rising production costs and international competition in recent years and has struggled to turn a profit. It suffered a £371m pre-tax loss in 2019 amid continuing uncertainty over Brexit. Since the pandemic hit, demand for steel has dropped massively as industries such as car manufacturing have ground to a halt.
Tatas plan layoffs
Meanwhile, the group is planning to eliminate jobs at some of its businesses to save fixed costs as it grapples with falling profits due to the coronavirus pandemic, and global economic projections pointing to a challenging time ahead. The conglomerate has already made moves to cut contract workers engaged in manufacturing and other functions at its various facilities, including at Tata Motors and its UK arm Jaguar Land Rover.
Tata Motors, after sinking £986.4 million into the red in the fourth quarter of fiscal 2020, said “there are widespread opportunities to cut costs across the organisation and all actions will be taken with prudence”, without getting into specifics. The flagship of the Tata Group has initiated a cash improvement programme of £600 million and 5 billion pounds at its India and UK units. Sources said the company plans to axe jobs at various levels in the domestic business.
