Steel sell-off - day three

The Aberavon MP Stephen Kinnock called on Tata to hold its nerve when he flew out to Mumbai for what turned out to be a bombshell announcement by the company.

Holding its nerve is clearly what the company has decided not to do with the decision to sell its UK operations as quickly as possible.

Company insiders told me they were shocked at the news.

A mothballing of a blast furnace? Maybe. A three month strategic review? Maybe. A sale of the entire UK operation in what was called a "time-bound" manner? Definitely not.


It's always been striking how highly Tata is considered by the workforce, even on the days when hundreds of jobs have been lost.

This will test that relationship to the limit. Tata has the reputation of being a good employer - it now needs to be a good seller as well.

If workers were taken aback by the news, then the UK Government gave the same impression with senior ministers out of the country, and mixed messages being issued in the immediate aftermath.

We now know that nationalisation is off the agenda. David Cameron has stressed that there's no guarantee of success, but significant help will be given to any deal if a buyer can come forward, which is the big challenge.

The entire industry is struggling. Even the world's biggest steel maker ArcelorMittal recently announced losses of £5.4bn.

There have been estimates that the top 100 steel producers in China made losses of £7.6bn last year, with much of that covered by state subsidies.


And any new buyer will look at how Tata, one of the world's biggest steel makers, tried and failed to turn the business around after spending £2bn over the past five years, and which has crucially dismissed a rescue plan.

If no buyer emerges in the coming weeks and months and Tata runs out of patience, then the big question is what will the UK Government do?

In order to entice a buyer forward it could dance around the EU rules on state aid by offering soft loans, or even help dealing with the pensions deficit which the Financial Times put at half a billion pounds.

All of this will be rumbling on at the same time as the EU referendum and the assembly election campaigns.

UKIP argues that if we came out of the EU, Britain would be able to raise tariffs against cheap Chinese steel, thus dealing with the main problem facing the industry.

Campaign issue

Those who want us to remain argue that it can already be done far more effectively within the EU.

But to complicate things further, one of the reasons that hasn't happened is because the UK Government has refused to support the scrapping of what's called the lesser duty rule which could allow tariffs to rise significantly.

And then there's the assembly. The impact is already being felt. Campaigning on a broad range of issues is already under way but in reality there's only story in town.

One party source told me that he didn't expect full campaigning to get serious until AMs have been recalled on Monday, and everyone's had their say on steel.

The future of the industry will clearly dominate any debate on economic development over the next five weeks.

The biggest danger is for the Welsh Conservatives to suffer as a result of criticism of the way it's been handled by the UK government.


Welsh Tory leader Andrew RT Davies has tried to head that off at the pass by calling on ministers at Westminster to consider taking a stake in the industry, which is virtually the same stance as the other parties. The Liberal Democrats for example have called on the UK goverment to be the lender of last resort.

Plaid has been trying to create its own narrative by setting out a plan for the Welsh Government to actively take a stake in the industry, something which has been dismissed by the First Minister as too expensive.

Plaid will try to portray Carwyn Jones as unambitious, Mr Jones will try to portray Plaid of pursuing fantasy politics.

Either way, the biggest threat ever faced by Britain's remaining steel industry will form the backdrop to an election in a part of the UK where it still has a major presence.