Tata Steel warns of “material uncertainty” over the future of its UK steel business

Tata Steel has expressed “material uncertainty” over the future of its UK steel business, citing challenging trading conditions and insufficient clarity over government support for a transition to greener steelmaking.

The warning was disclosed in the company’s financial results for the year ending March 2023, as reported by the Financial Times.

Earnings before interest, tax, depreciation and amortisation (EBITDA) at Tata Steel Europe, the subsidiary that includes the company’s UK and Dutch operations, fell 60% to £477 million for the year. The company reported a loss of £176 million in the final quarter of the year.

Tata Steel UK’s future is further clouded by external market risks such as higher inflation and interest rates.

The company has also expressed concern over the adequacy of UK government support to help decarbonise its operations.

The industry’s 8,000-strong UK workforce, including approximately 4,000 in Wales, face growing uncertainty as the steel sector grapples with the challenge of meeting stringent climate targets.

In 2020, Tata Steel had warned that the COVID-19 pandemic could threaten its UK operations. Last year, the UK government offered Tata Steel UK and British Steel, the country’s second-largest producer, roughly £300 million each in aid.

This sum is significantly lower than the estimated £2 billion or more needed for Tata Steel UK to decarbonise its operations and falls short of the funding provided to European competitors.

Henrik Adam, chair of Tata Steel UK, told the Financial Times that the steel industry needs a “relatively safe guarantee that they will have a level playing field with European competitors.”

The industry seeks certainty on the level of support for investment and energy costs. Adam further emphasized the importance of the steel manufacturing industry as the core of a modern economy.

Tata Steel recently launched a cost-saving drive aiming to save approximately £100 million over the next six months. Unions and opposition MPs have argued that the steel industry, which employs about 34,000 people, requires more support.

In 2022, crude steel production dropped 17% to just 6 million tonnes, marking the lowest level since the Great Depression of the 1930s, according to UK Steel, the industry’s trade body.

In response to these concerns, the Department for Business and Trade stated that the UK Government is providing extensive support to protect the steel industry from unfair trade and energy costs.

This includes £800 million in relief for electricity costs and access to support funds worth £1.5 billion to cut emissions and increase energy efficiency.