Tata job fears as steel giant writes off £1bn

Tata Steel wrote down the value of its European arm by �1 billion. Picture: PA
Tata Steel wrote down the value of its European arm by �1 billion. Picture: PA
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FRESH fears over the future of UK steel jobs were raised yesterday after India’s Tata Steel wrote down the value of its European operations by £1 billion.

The group – which runs sites including Motherwell, Port Talbot, Rotherham and Scunthorpe – blamed tough economic conditions in Europe, where steel demand has slumped by about a third since the start of the financial crisis.

Trade unions warned that the huge writedown will worry its 18,500 staff in the UK, still reeling from 900 job cuts last year.

Analysts at Investec Securities noted: “Speculation has increased that the group will look to sell assets within this division.”

Tata, which bought Anglo-Dutch steel giant Corus in 2007 for £6.2bn, has endured a tough time during the downturn as demand from construction and car-making dived, forcing thousands of lay-offs along with plant closures.

The company employs more than half its 33,000-strong European workforce in the UK.

Tata announced a further wave of redundancies in November, including almost 600 in South Wales, in an effort to cut costs.

The group warned that tough conditions are likely to persist for the “near and medium-term”.

It said: “The impairment is primarily due to a weaker macroeconomic and market environment in Europe where apparent steel demand has fallen significantly in 2012-13 by almost 8 per cent, which in aggregate results in almost 30 per cent since the emergence of the global financial crisis in 2007.

“The above underlying condition is expected to continue over the near and medium term, and has led to the downward revision of cash flow expectations underlying the valuation of the European business.”

In February, Tata’s European business reported a $78 million (£51m) underlying loss for the three months to 31 December, with steel deliveries falling by almost 10 per cent to 3.02 million tonnes.

Paul Talbot, from the Community trade union which represents many UK steel workers, said: “These statements are concerning, there’s no question about it.

“They are concerning to the employees who at this moment are still working their way through the last announcement.

“It’s no secret that the steel industry has been going through difficult times.

“Time after time we’ve been given assurances that Tata have no plans to cut back on investment in the UK again in any further restructure or closure of plants.”

The writedown of Tata’s assets and goodwill is thought to be one of the largest ever by an Indian company and also includes impairments covering its operations in South Africa and Thailand. Final figures for the writedown will be included in Tata’s final results on 23 May.