Potential buyers of Tata Steel UK have said they would not be willing to take on the company’s pensions liabilities, Business Secretary Sajid Javid has told MPs.
The pension fund has more than 130,000 members and a deficit of 485m.
He told the Business select committee: “It’s not unreasonable … to say ‘look we’re interested in the assets but this would be an issue’.”
Pension fund trustees were in talks with the regulator, Mr Javid said.
Bimlendra Jha, chief executive of Tata Steel UK, told MPs that a sale would not happen unless the pension fund deficit was addressed.
“If we don’t solve it we are staring at some very bad consequences for the taxpayer … We are staring at a huge economic and social disaster,” he said.
Mr Javid reiterated that the Government would not take a stake of more than 25% in Tata Steel’s UK assets and that he wanted a sale of Tata’s steel assets completed as soon as possible.
The business secretary denied he had been on the back foot throughout the crisis.
He said with hindsight he should have attended a Tata board meeting in Mumbai in March when Tata decided to sell its UK business. At the time he was on an official visit to Australia.
Mr Javid insisted he had been working with Tata since February to find a buyer for its steel business after he discovered it was planning to close Port Talbot.
Tata’s Mr Jha told MPs that the government needed to do more to help the company find a buyer.
Although there was no set deadline for a sale, he said that Tata could not continue to “bleed” indefinitely.
Mr Jha said Tata was not prepared to split up its UK steel assets to secure a sale: “We would not deal with … somebody saying leave alone Port Talbot and give us the rest – that is not a solution that’s acceptable.”
He blamed the sale on “structural weaknesses” in the UK, such as high energy costs and business rates.
“If we were at the same electricity costs as Germany , then [Tata Steel UK] would be 40m better off – we would not be having negative numbers,” Mr Jha told MPs. “We would not be selling the business if we were not losing money”
David Cameron visited the Port Talbot steelworks in South Wales on Tuesday in a bid to assure workers of the Government’s commitment to support the plant’s future.
The UK government has said it would consider taking a stake in Tata Steel UK.
Stuart Wilkie, Tata Steel UK’s director at Port Talbot and Llanwern, is working on plans for a management buyout.
Downing Street said the government was doing all it could to secure a “sustainable future” for the plant.
Read more: http://www.bbc.co.uk/news/business-36157385