Tata plea to UK government over economy 'obstacles'

The head of Tata Steel in Europe Dr Karl Kohler says he is experiencing one of the toughest times in his 30 years in the industry

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The head of Tata Steel in Europe says there is a desperate need for a growth strategy in the UK, to deal with problems in the industry.

Dr Karl Kohler visited the company's Port Talbot plant, for the launch of the final phase of work to rebuild a blast furnace there.

He called for the UK government to take down "obstacles" to growth.

But Welsh Secretary Cheryl Gillan said there was no "painless way out of the mess we inherited".

Tata - which employs 7,500 in Wales - warns it may delay lighting the £185m blast furnace in Port Talbot if the market stays subdued.

First Minister Carwyn Jones, who was at the plant for the launch, said investment was a way of ensuring the industry in Wales would be successful in the future.

"You don't build something like this, and put £185 million of investment into it, if you're not going to use it," said Mr Jones.

"At moment, we know things are difficult for the steel industry, what's important for a steelworks is that there's investment - in state of the art technology and so it's in a position to compete effectively in the future."

Tata Steel's European chief executive Dr Kohler said the company faced higher energy costs than competitors overseas.

Analysis

Exactly a month ago Tata steel raised the possibility that the new blast furnace at Port Talbot would not be switched on when the work is completed at the end of the year.

Then came the news that many of the workforce are facing cuts in hours and pay because of a drop off in orders.

Today's call from the boss of the European operation will be the third time there has been worrying news for the workforce.

These are difficult times for the entire steel industry, particularly as a result of the drop off in construction, and Tata is no exception.

'Obstacles'

Dr Kohler called for the UK government to take down "obstacles" to growth.

His visit on Thursday marks the start of work on the Number 4 blast furnace at Port Talbot, with completion due in November.

The company is also creating a £55m gas-cooling system at Port Talbot.

Dr Kohler said the £240m investment in Wales showed the company's commitment, but Tata needed ministers' help "to remove obstacles that are in our way as far as competitiveness is concerned".

"The UK is far more expensive due to government levies and fees than other places like Germany, like France where our direct competitors sit," he said.

Tata's presence at Port Talbot was an example of the kind of foreign investment that Prime Minister David Cameron had called for, he said.

"But we need to look at this in a more strategic sense and we call on the government to also think about their supply chain in a more strategic way and we are ready to help and give input to that discussion," he added.

The UK government pointed out that the International Monetary Fund (IMF) says fiscal plans are appropriate.

The Treasury has also said the IMF believes it is right "to support the economy through monetary and credit easing as well as government guarantees for infrastructure".

The first minister said he had written to Business Secretary Vince Cable about the effect of energy prices on big industrial manufacturers.

Mr Jones said: "Tata has been open about the challenges it faces due to the global market for steel.

"Despite these difficulties it remains committed to Wales and the investment of £185m into this new blast furnace is evidence of their long-term commitment to Port Talbot and Wales."

Dr Kohler's visit comes a day after official figures showed the UK's economic output shrank for the third quarter in a row.

Last month, it was revealed a third of steel workers at Port Talbot are facing reduced shifts and pay allowance deductions because of a fall in the demand for steel.

Reducing hours

Workers at the sister factory in Llanwern, Newport, will also be hit by changes in their shift patterns.

The company has been meeting unions to discuss a plan about reducing the hours staff work until the market recovers.

Last week the International Monetary Fund (IMF) urged the government to slow the pace of budget cuts next year if UK growth does not recover.

The IMF gave a summary of the report in May, since when the government has introduced growth measures, such as providing funding for lending, moves which were praised by the IMF.

Mrs Gillan added: "Tata is clearly operating in an extremely challenging market - both domestically and internationally - but I am re-assured that Tata is fully committed to its investment in the UK."

The Department for Business, Innovatgion and Skills added that it had announced a £250m energy intensive industries package in its autumn statement to "help alleviate the costs of rising electricity prices for energy intensive businesses".

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