Steelworkers Face Pay Cut Under New Owner

Thousands of steelworkers face a one-year pay cut as part of a rescue deal being thrashed out to secure the future of their factory in Scunthorpe.

Sky News has learnt that employees at the Tata Steel (BSE: TATASTEEL.BO - news) site are to be balloted in the next fortnight on the terms of a new pay and pensions package discussed between Greybull Capital and trade union representatives last week.

The deal has yet to be finalised but is understood to include a 3% cut in basic pay during the first year of Greybull's ownership before reverting to existing levels.

The 4000 workers based at Scunthorpe would be transferred from the old British Steel final salary pension scheme to a less generous defined contribution scheme.

People familiar with the terms of the deal outlined last week said its net effect on take-home pay for members of the new pension scheme would be "neutral" because of adjustments that Greybull would make to pension contributions during the first year.

They declined to say why the prospective new owner of the Scunthorpe steelworks - and another long-products factory in France - intended to structure the package in this way.

Representatives of the joint union in Scunthorpe are said to have agreed that the deal was reasonable following an initial proposal for a larger cut in basic pay of as much as 10%.

Tata Steel's Scunthorpe site, acquired as part of the Indian company's takeover of Corus in 2007, makes long products such as rails and beams for the construction industry.

Greybull's investment is likely to include a Government loan made on commercial terms to avoid breaching European Union state aid rules, as well as a substantial dowry from Tata Steel.

Industry sources had suggested that John Bolton, a former Tata Steel executive, had been approached about running the business for Greybull, but this was dismissed as inaccurate by insiders.

Tata Steel had set a deadline of the end of March for resolving the future of the Scunthorpe steelworks, and sources said it was conceivable that a formal deal - subject to certain conditions - could still be announced before Friday.

The complexity of the transaction meant it could yet slip into April, however.

Greybull declined to comment on Wednesday, while a union source said it was "working hard with Tata, Greybull and all our members to ensure a positive future for the long products business and is hopeful of securing it".

News (Other OTC: NWSAL - news) of the proposed package for the Scunthorpe workforce comes as the Indian-owned group begins a process of finding buyers for parts or all of the rest of its UK business, which employs 15,000 people.

The largest site, at Port Talbot in Wales, had been the subject of a possible rescue plan, which was rejected by Tata Steel in Mumbai on Tuesday as "inherently very risky ... and highly uncertain".

The decision to pursue "all options for portfolio restructuring" deepens the crisis facing the UK's steel industry and the country's broader manufacturing base.

Thousands of jobs have already disappeared at key steelmaking sites across the UK amid a glut of cheap steel flooding global markets and comparatively high energy costs in the UK.

Ministers have faced criticism for failing to address the mounting crisis at an earlier stage, with calls from politicians and unions for parts of the industry to be nationalised.

John Longworth, who stepped down as the British Chambers of Commerce director-general this month after speaking out in favour of leaving the EU, said: "The fundamental reason that the UK Government cannot help steel and other vital foundation industries is that they have no authority to do so and are blocked by EU rules (Other OTC: UBGXF - news) ."