Tata Steel merger plans: Where will jobs axe fall?

It's a deal aimed at securing the future for two major European steelmakers, but it will come at the cost of around 4,000 jobs.

Tata's Steelpark at Wednesfield
Tata's Steelpark at Wednesfield

Bosses at Tata Steel and German firm Thyssenkrupp have taken the first step towards a merger by signing a memorandum of understanding.

It will see Tata's UK business, employing 8,500 people, become part of Europe's second biggest steel company employing 48,000 people.

UK union leaders say they are seeking reassurances about UK jobs. Their opposite numbers in Germany and across Europe will be doing the same, but bosses at Thyssenkrupp have already made it clear that 4,000 jobs will go, around 2,000 from each of the two merging businesses.

In a statement to its workforce yesterday morning, the German firm said: "In the joint venture as a whole it is expected that up to 2,000 administrative jobs and possibly up to 2,000 jobs in production will have to be cut in the coming years. These cuts would be shared roughly evenly between Thyssenkrupp and Tata."

The big question will be where the jobs axe will fall.

Offering a cautious welcome to the merger, there were words of warning from Roy Rickhuss, general secretary of Community and chairman of the joint committee of steel unions, which includes the GMB and Unite.

"The steel trade unions cautiously welcome this news and recognise the industrial logic of such a partnership. This would create the second biggest steel business in Europe which could deliver significant benefits for the UK.

"As always, the devil will be in the detail and we are seeking further assurances on jobs, investment and future production across the UK operations.

"As a priority, we will be pressing Tata to demonstrate their long term commitment to steelmaking in the UK by confirming they will invest in the reline of Port Talbot’s Blast Furnace No.5.

"We must also be assured that ThyssenKrupp’s pension liabilities will be ring-fenced with a cast-iron guarantee that UK steelworkers will never fund German pensions.

"We are now seeking an urgent meeting with Tata to fully understand their intentions for the UK in the context of the joint venture. We are also making arrangements to bring together senior representatives from across the UK to determine our approach to this significant new development."

Cautious welcome – Former steel worker Roy Rickhuss

Wolverhampton-born Mr Rickhuss, who started his career working at the former Wednesfield Tubes factory where Tata's huge 50-acre Steepark now stands, added: "While a merger of this size will inevitably mean a review of support functions such as HR and IT, the vast majority of these roles are no longer located in the UK.

"We have been assured there will be no asset closures or reductions in production capacities across the UK. If the company does seek to implement compulsory redundancies we will fight that using every necessary means."

The prospect of further job cuts has been a constant for British steel workers for decades. Since it was created by the nationalisation of steelworks across the UK in the 1960s the former British Steel business has shed tens of thousands of jobs. Once a key industry in the Black Country, the area has seen the closure of steelmaking sites at Bilston, Halesowen and at Round Oak in Brierley Hill that cost thousands of local people their jobs.

Privatised in 1988, British Steel merged with Dutch firm Hoogovens in 1999. At that time the business still had 18 sites from Wednesbury and Walsall across to Wombourne and Kidderminster, employing around 2,000 people.

Fresh closures followed, steadily whittling down the business both locally and nationwide. The company's takeover by Indian steel giant Tata in 2007 was inevitably followed by fresh closures and sell-offs.

Today a company that employed 30,000 people in England two decades ago is down to less than a third of that figure, just 8,500. In the Black Country just three sites remain: the major distribution centre at Wednesfield Steelpark which has just undergone a £4m investment in new robotic equipment, a plant at Bescot in Walsall making pre-finished steel for use in bakeware, and a small processing operation at Brierley Hill. In total they employ around 650 people.

Some lucky workers, like those at the former Tata Steel site in Wednesbury, have found a new home with recent arrivals Liberty House, the family firm headed by dynamic tycoon Ranjeev Gupta, who has built a British-based international steel group employing 11,000 people in just the last few years.

About 2,500 of those are in the West Midlands, including around 1,000 in the Black Country who previously worked for the Caparo engineering business before its collapse in 2015. Liberty was a leading contender to buy Tata's UK steel business when it was briefly up for sale last year and was disappointed to miss out. It might still be interested in Tata's Port Talbot steelworks if it ever comes on the market again.

The other party to the new merger, Thyssenkrupp, is already one of the world's biggest steel companies, with 156,000 employees in 80 countries around the globe. It can trace its roots back to Friedrich Krupp's original steel factory in 1811 and is also famous for making lifts, as well as armaments during the two world wars.

In the UK it has around 1,750 people working in its materials, aerospace and lifts businesses across 17 sites. It's UK head office is in Solihull and locally it has a major materials site at Cox's Lane in Cradley Heath as well as plants in Tyldesley and Witton in Birmingham. None of those are involved in the merger deal, which allows Thyssenkrupp to hive off its traditional steel business while retaining more profitable higher-tech operations.

Meanwhile the Black Country's heritage has left it with hundreds, if not thousands, of steel industry pensions. The merger deal between Thyssenkrupp and Tata was only made possible after the Indian company negotiated a deal with pension trustees, unions and the pensions watchdog to separate itself from the British Steel Pension Fund it had inherited, which has 125,000 members and liabilities estimated at £15 billion.

The deal, called an RAA or regulated apportionment arrangement, saw Tata Steel pay £550m into the pension pot and give the trustees a one third stake in the company.

But the merger deal will obviously see that stake diluted.

In a statement the fund trustees said they would continue to hold 33 per cent of the shares in Tata Steel UK which, with Tata Steel Europe, would jointly have a 50 per cent stake in the new business with Thyssenkrupp.

"The proposed merger will have no impact of the terms of the RAA and existing scheme members," they added.

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