Steel crisis deepens: Tata confirms plans for 1,200 redundancies after Caparo's fall into administration puts 1,700 jobs at risk

By Laura Chesters For The Daily Mail and Jonathon Hopkins for Thisismoney.co.uk

Published: 16:47 EST, 19 October 2015 | Updated: 05:46 EST, 20 October 2015

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India-owned Tata has confirmed plans to cut 1,200 jobs as the crisis in Britain’s steel industry deepens, with another 1,700 under threat after Caparo Industries last night fell into administration.

Tata said around 900 jobs will be cut from the firm's giant plant in Scunthorpe, with 270 going in Scotland and a small number in other sites.

The firm said the cuts were in response to a shift in market conditions caused by a 'flood' of cheap imports, particularly from China, a strong pound and high electricity prices.

Further cuts: Tata Steel has confirmed plans for 1,200 redundancies in Scunthorpe and Scotland

Karl Koehler, chief executive of Tata Steel's European operations, said: ‘The UK steel industry is struggling for survival in the face of extremely challenging market conditions.

‘This industry has a crucial role to play in rebalancing the UK economy, but we need a fairer system to encourage growth. The European Commission needs to do much more to deal with unfairly traded imports - inaction threatens the future of the entire European steel industry.’

Tata said that in the past two years, imports of steel plate into Europe have doubled and imports from China have quadrupled, causing steel prices to fall steeply.

The group said plate mills in Scunthorpe, Dalzell and Clydebridge would be mothballed, while one of the two coke ovens at the Scunthorpe steelworks would be closed under today's proposals.

Tata said it was starting immediate consultations with workers and their union representatives.

The crisis facing the steel industry has worsened rapidly in recent weeks. Up to 5,000 jobs have either been lost or are in danger this month – 15 per cent of the sector’s 30,000 strong workforce.

Caparo, which operates from around 20 sites across the UK as well as in India and the US, filed for administration in a Birmingham court. Accountant PwC, which is acting as administrator, is trying to find a buyer for 16 businesses based in the Midlands as well as in Manchester, Hartlepool, Bristol and Wales.

Caparo Industries - founded by Labour peer Lord Paul - made a £5.3million loss in 2014, following a loss of £3.4million the year before.

Turnover fell 1.3 per cent last year to £368.1million and it has bank debts of £54million due to be repaid next June.

It follows the liquidation of Thai-owned SSI’s Redcar plant in the North-East with the loss of around 2,000 jobs earlier this month.

Caparo’s operations include steel tube and pipe making as well as companies involved in engineering and technology.

The Caparo empire was founded in 1968 by Indian-born Lord Paul, who is now chairman. He is one of Britain’s wealthiest people with a fortune of more than £2billion.

Many of the group’s global subsidiaries are unaffected by the administration including those in hotels, media and financial services.

Matt Hammond, partner at PwC, said: ‘Steel prices and exchange rates have had an impact on some parts of the Caparo Industries group.

Jobs threat: Caparo Industries, which operates from around twenty sites across the UK as well as in India and the US, filed for administration in a Birmingham court

'Our focus is on briefing staff across the group and working closely with their management teams to ensure that every opportunity for these businesses is considered.

'We will be working with all parties to ensure the best outcome for all creditors of each business.’

The news of Caparo’s troubles emerged as the steel industry called on Prime Minister David Cameron to tackle steel-dumping by China when he meets the country’s President Xi Jinping this week.

Britain’s steelmakers are blaming their woes on China, accusing the country of flooding world markets with cheap steel.

Many of China’s steel manufacturers have received heavy subsidies at home and have continued to produce even as demand has fallen, which has led to a glut on world markets.

According to UK Steel, the price of Chinese steel has been consistently below market rates with an excess capacity last year of 340million tonnes, more than double the EU’s annual steel demand of 155million tonnes.

WorldSteel predicts global steel demand is forecast to record a 2 per cent year on year fall.

Roy Rickhuss, general secretary of steelworkers' union Community, said: ‘We have been saying for years that more Government action is needed to support UK steel as a vital foundation industry. We have made clear that the situation is urgent. Despite these warnings the Government has been too slow to respond.’

He added: ‘It is not enough for David Cameron to “raise” the issue of steel dumping with the Chinese, he should be telling them what action he will be taking to stop steel dumping.

‘The UK Government could also show its support for the UK steel industry by bringing forward the compensation package for energy intensive industry.

‘UK steelmaking is on its knees but I know that steelworkers across the UK are determined to fight for their future for the sake of their jobs, their families and their communities.’

Gareth Stace, director of trade body UK Steel, said: ‘Our fears about further job losses have now been confirmed.

'If we are to stem this tide then the Business Secretary must now deliver as a matter of urgency the commitments he made at last week's summit, on energy costs, business rates costs and tackling unfair trade.

'In addition, we must also see a commitment from all parts of government at the highest level to ensure the sector's survival in the UK.

‘The Prime Minister can demonstrate that he is prepared to lead this commitment by stepping in this week and pressing the Chinese Premier about the dumping of under-priced steel, which is one of the major factors killing our industry.’