Tata Steel is facing a £500-million loss from its shocking decision to close its Port Talbot plant earlier than planned. The bosses are scrambling to reach a last-minute deal.
The Indian-owned firm has decided to delay plans to take a final decision about closing the plant early. The company had originally planned to close the works on Sunday, but agreed to continue talks with the Unite Union on Monday in order to break the impasse.
Tata surprised unions by announcing last week that it would move the shutdown of blast furnace production to September as a response to Unite planning an indefinite strike starting on July 9th.
Unite’s strike decision contrasted with the other unions in the plant who vowed to stay put while redundancy negotiations continued.
A premature closure would be a problem for companies who purchase steel from Tata UK. Jaguar Land Rover and JCB are just a few of the well-known companies that rely upon it. If Tata and Unite are unable to reach an agreement, they have activated contingency plans that will switch suppliers overseas.
Unite’s call for a strike caused a split in the union movement. Community and GMB, the other two unions in the plant, agreed not to strike as long as management continued talks over improved redundancy packages.
Tata diluted the redundancy package for all three unions after Unite announced their strike. Unite was blamed by the company for its decision of bringing forward the shutdown of blast furnace production. The steelworks has two blast furnaces that were to be decommissioned by the end of September and June respectively.
Tata stated that it could not guarantee the safety for the remaining blast furnaces in the three-month period until the end of September, if Unite members took “indefinite” strikes. On Friday, talks began over a “derogation”, or exception to the walkout. This would ensure that the minimum staffing level at the blast-furnace was maintained to maintain its safety.
If Port Talbot’s steel blast furnaces shut down, Tata could be forced to fulfill contracts with customers by purchasing steel from elsewhere
Unite stated: “We will ensure all safety procedures are met.”
Rajesh Nair wrote to employees late Friday night, saying that the “minimum level of safety coverage” is not enough to ensure safe operations on all sites. Our preparations to cease operations next week must continue. Senior Unite officials will meet their local representatives to discuss remaining derogations proposed by the company at the beginning of next week, he said.
A court ruling could have significant implications. Tata has filed a High Court case challenging the validity of Unite’s strike action. A judge will make a decision on Wednesday. If the ruling is in Tata’s favor, it may be that the company will reverse its plan to close the blast furnace earlier.
Industry sources say that if Tata’s legal challenges fail and the talks with Unite fall apart, the company could be hit by a £500-million loss if it closes the blast furnace too early. Senior management at Tata warned Unite officials about this last week.
Tata could be forced to buy steel from other suppliers in order to fulfill contracts with customers. The company will also have to pay for raw materials already ordered in the coming months. Sources say that seven ships carrying coal and iron ore are expected to arrive at Port Talbot by the end of September.
Labour wants to avoid a crisis if they win the election on Thursday. According to Whitehall sources, Jonathan Reynolds, shadow business secretary and Sharon Graham (General Secretary of Unite) have had several phone calls during which the Labour frontbencher pushed for the union’s strike to be called off.
Sources familiar with the talks between Tata, Unite and the union said that the union would be willing to call off its strike if Tata offered better redundancy plans.
Prior to this, the redundancy package was equivalent to 2.8 week’s pay for each year of service, with a maximum of 25 years. The average salary of steel workers is estimated at £36,583. This means that longer-serving staff were eligible for a severance package worth around £50,000. For newer employees, a minimum payment of £20,000 has also been proposed.
However, the agreement was conditional on there being no strike action. Unite’s planned strikes mean that no matter what union you belong to, all employees are entitled to only 2.1 weeks of pay for each year of service. There is no minimum guarantee payment.
A spokesperson said: “Unite repeatedly requested that the firm commit to delaying any final decisions regarding the future of blast furnaces until meaningful negotiations are possible after the elections. Tata only wants to negotiate to sell jobs through redundancy packages. This is unacceptable.
“Tata is doubling down on its efforts to stop industrial action, threatening to continue and hiring City attorneys to do so. Unite may re-ballot the vote if they succeed. “We cannot let these steel jobs go.”
Tata Steel has declined to comment.
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