The chief executive of Tata Steel UK on Thursday defended his parent company’s decision to sell the business but told MPs that the growing deficit in the British Steel pension fund would be worsened if the Port Talbot plant was closed.
Appearing in public for the first time since the company’s announcement in March, Bimlendra Jha said it had tried to resolve the pension problem 18 months ago through talks with the unions to avert a “huge economic and social disaster”.
Tata has put £85m into the pension fund in the last two years and had promised another £125m for 2016-18.
A shutdown of Port Talbot would reduce the number of active contributors to the pension fund by 4,700. The fund has liabilities of about £15bn and a widening deficit that is already £485m.
There could still be a solution that did not involve “dipping into the pockets of the exchequer but doesn’t hurt the company going forward,” he said. “We are negotiating with the government to protect the interests of existing pensioners.”
Sajid Javid, the business secretary, confirmed that talks were ongoing between pension trustees, the company, the pension regulator and the government: “We are trying to facilitate a solution in any way we can,” he told the business select committee.
Mr Javid said that many buyers were interested in the assets, but not if they had to take responsibility for the pension scheme.
“I can’t be specific because it would be commercially sensitive but . . . a number of the potential buyers have said they won’t have much interest if they have to take over the current pension plan as it is. It’s a plan that has some 130,000 members, it’s a very big plan, it’s expensive.”
Mr Jha defended the company’s decision to sell, saying it could not “continue to bleed” and that the Indian company had sustained huge financial losses since buying Corus for £6.2bn in 2007.
It had made £1.5bn of investment and taken £2bn of writedowns on the British steel industry, he told the business select committee.
Mr Jha said Tata had not decided to sell the business until its board meeting on March 29, but that the pressure had been building for a while: “The writing was on the wall all the time.”
Ministers had been aware of its warnings via a “constant dialogue” with the business department, he said. “We have been so transparent with the government.”
Mr Javid rejected accusations from Peter Kyle, a Labour MP, that the government had not had its “finger on the pulse” and that he had not acted quickly enough after Tata announced the sale.
He admitted that in retrospect he would not have continued with a trip to Australia in the same week.
But he said that turning up at the Tata board meeting in Mumbai instead would have been a “photocall” that would not have helped steel workers.
Mr Jha also indicated that Tata Steel would be reluctant to split up its UK portfolio for potential buyers, saying: “We would not deal with . . . somebody saying leave alone Port Talbot and give us the rest. That is not a solution that’s acceptable.”
The Tata executive said there were structural problems with Britain including business rates and high energy costs: he suggested that if the business had been in Germany it would be paying £40m less on electricity.
But he stopped short of blaming the government for the decision to sell, only saying more broadly: “If we were not losing money we would not be leaving the UK.”
The FT has revealed that Tata is privately aiming to close the business in June if no successful sale is conducted by then. Mr Jha said there was no “drop dead” deadline for the sale, but it was a matter of urgency to proceed quickly.
He said Tata’s advisers — including KPMG and Standard Chartered — believed it was “quite a liberal timeframe” compared with what administrators would do.
“We have indicated the timescales. There is no dead drop time that has been given,” he said. “But you’ll appreciate that with the losses . . . urgency is important. We cannot continue to bleed.”
Mr Jha insisted Tata had always acted “responsibly” and was genuinely trying to find a buyer.
But he said Tata had invested in the British steel industry. “There is only one set of people in the room that pays the bill and that is us,” he said. “There are a million shareholders who are also bleeding with us. It’s not possible for us to carry it on.”
Tata wants non-binding letters of intent from potential buyers by a deadline of next week.
Mr Javid expressed frustrations with “stakeholders” who expected him to single-handedly save the industry.
In reality the government had to deal with the “reality” of state aid rules and other hurdles, he said: “I will do everything within my power to help, but that is all I can do. I cannot change the price of steel globally.”
The business secretary said the government had written to suppliers and customers of Tata Steel UK to reassure them that they were working to keep the company afloat.