Brexit: Sterling’s slump could boost prospects for UK steel

Following Brexit vote, the slump in sterling may boost UK steel industry survival prospects, as Tata Steel approach deal.

Tata Steel is close to a deal to save its Port Talbot plant despite Britain’s vote to leave the EU, with the fall of sterling having the potential to boost the industry’s chance of survival.

Following the results of the Brexit vote, on Friday, the pound fell to its lowest levels in 30 years against the dollar. The steel crisis, which was largely caused by China exporting steel to Britain, could be set to benefit from leaving the EU, as it is now much more expensive for China to continue to do so.

Sources close to Tata say that the company is continuing to work with the government to keep its UK business, and that as a result of the slump in sterling’s value, the industry could benefit.

More than 11,000 jobs are at risk after Tata Steel announced in March that it was considering pulling out of its UK business, which includes the Port Talbot steelworks in south Wales.

Following the government pledge to offer hundreds of million so of pounds of support, and the restructuring of the pension scheme, Tata Steel has decided to work on a deal to keep its UK concern.

A senior source close to the Indian company said it was still likely to keep the business, which would be a boost to the beleaguered Conservative government, whose efforts to help Port Talbot have been criticised. The source said: “Unless something drastic happens, then early next week they will make a statement.”

Tata Steel’s main concern is whether the government have the strength to push through the changes to the British Steel pension scheme, which need to be enshrined in law. The latest figures show the deficit has ballooned to £700m, up from £485m last year, and its liabilities are almost £15bn.

The government’s plan would mean the scheme would be spun off into a new “shell” company and the inflation-linked annual increase benchmarked against the consumer price index rather than the retail price index, potentially saving billions of pounds in future liabilities.

Some have argued that this could create a dangerous precedent and encourage other companies to walk away from their pension liabilities.

A spokesman for Tata Steel said the company was “committed to developing the best prospects possible for our UK operations.

“Decisions by the UK electorate will always be respected by Tata Steel. Whatever the political framework, we are committed to developing the best prospects possible for our UK operations.”

Gareth Stace, Director of the trade body UK Steel said: “It is now more essential than ever to create the right business conditions in the UK that allow the steel industry to survive, invest and thrive. This will ensure that our vital supply chains, such as defence, automotive and construction, can rely on the production of steel in the UK so we are self-sufficient and can never be left at the mercy of others.

“Government now needs to fully and finally tackle head-on the uncompetitive electricity and policy costs that have historically hindered the growth of steel producers and seen thousands of high-skilled jobs lost over the last year. Government can now match words with actions and take the lead in dealing with subsidised exports, most notably from China, that are slowly destroying steelmaking in the UK.”

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