 "Potential UK steel buyers balk at pension liabilities, says business secretary")
Tata Steel's pension liabilities are putting off buyers for its British steelmaking operation, Business Secretary Sajid Javid said on Thursday, underlining the difficulty the government faces in securing a sale that would save thousands of jobs.
India's Tata group announced plans to quit its entire British steel operation last month, leaving the government battling to save an industry that has been hurt by cheap Chinese imports, soaring costs and weak demand.
The government, keen to avoid the reputational damage caused by the loss of 10,000 jobs, has offered hundreds of millions of pounds in support to potential buyers, including the option of taking a 25% stake in the firm alongside other buyers.
But appearing in front of a parliamentary inquiry into the decline of the industry, both Javid and Tata Steel UK's chief executive Bimlendra Jha said the firm's pension deficit, last estimated at nearly 500 million pounds ($730 million), was a major stumbling block.
"A number of the potential buyers have said that we won't have much interest if we have to take over the current pension plan as it is," Javid told the committee of lawmakers.
Jha said there were big question marks about the viability of the main asset in its British portfolio - a steel plant in the Welsh town of Port Talbot.
"If this pension fund liability is not taken care of, there is no buyer sitting out there to buy this business," he said. "If we don't solve that problem we are staring at some very, very bad consequences for the taxpayers of the UK."
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The government has said it is working with the pension scheme trustees of Tata Steel to reduce the impact on any purchaser, including whether it could separate the scheme from the business.
Javid said he did not see the pension liabilities as a big threat to the public purse.
Jha also called on the government to do more to help attract a buyer.
"There is an emerging awareness that there is more that needs to be done and can be done," he said.
He said that government support to lower energy costs was "obviously not adequate" in the case of the Port Talbot steel factory, and that the firm would not be willing to consider any bid that did not include the purchase of the plant
Javid said the government needed to do more to help lower electricity prices, one of the biggest contributing factors to high production costs in Britain, but he did not specify any new plans.