Tatas may exit the UK Steel business due to lack of government support

14 Oct 2022 , 11:05 AM

According to news reports, Liz Truss’ British government is unlikely to provide a £1.5 billion subsidy package for the anticipated switch to green energy, hence Tata Sons is considering exiting Tata Steel’s UK operations.

According to Tata Sons, in order to keep the factory running over the following several years, it will be necessary to replace the carbon-intensive blast furnaces with electric arc furnaces.

According to one of the reports, Tata Sons doesn’t see much use in waiting interminably for assistance from the UK government, which is “sitting on the fence” and many departure options are being considered.

The Tata Group, which has a sizable corporate presence in the UK and has been for several years, has been outspoken about the need for government support in order to be successful.

An official who talked to news reporters said, “Our group has never believed in exiting enterprises that are also assisting local communities, but it has to be acknowledged and supported by the government too.”

As the only other option, the executive stated, “We have been in conversations over the previous two years and there should have been a resolution to this now.” 5 million tonnes of steel may be produced at the Port Talbot plant annually.

The UK government’s efforts to reduce carbon emissions and Tata Steel UK’s innately expensive operational expenses are at the core of the issue. Tata Steel plans to close two blast furnaces at the Port Talbot plant in Wales that are also getting close to the end of their useful lives in order to reduce their carbon footprint. Electric arc furnaces are suggested to take their place.

According to reports, the restructuring might cost as much as £3 billion. However, the steelmaker believes that the firm does not warrant such a significant investment, so it is apparently looking to the British government for half of the funding. Around 8,000 people work at the Port Talbot factory, which is a major reason why the Conservative government should think about continuing to support it.

While Tata Sons may be in talks with prospective buyers, analysts warned that if the company is unable to manage the steelworks sustainably, it will be extremely difficult to find a new investor who is willing to put money into the project. A withdrawal of Tata Steel from the UK will have little effect on shareholders.

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