Tata steel to shelve 1,500 jobs in UK factory

 | May 20,2011 06:28 pm IST

Indian steel major Tata Steel Friday said it will lay-off around 1,500 employees at its UK plants owing to a continued slump in demand, even as it announced an investment of $650 million (400 million pounds) in its long products business over the next five years.


"The continuing weakness in market conditions is one of the main reasons why we are setting out on this difficult course of action," said Karl-Ulrich Kohler, managing director and chief executive of Tata Steel's European operations.


According to the company, the decline in some major segments, particularly the construction sector, has been a key factor behind the decision to shelve jobs.


"Demand for structural steel in the UK is only two-thirds of the 2007 level and is not expected to fully recover within the next year," the company said in a regulatory filing to the Bombay Stock Exchange (BSE).


The company will close or reserve parts of its Scunthorpe plant situated in Lancaster district, UK and plans to restart it later if market conditions improve. The move will result in 1,200 jobs being lost.

Further 300 more positions would be terminated at the company's Lackenby Beam Mill at Teesside in northeast of England.


"The jobs at risk are in operational, functional and management positions. A 90-day consultation process will begin soon with affected employees and union representatives," the filing said.


The company also cited the upcoming strict carbon emission regulatory legislations by the European Union (EU) and the UK government, which have potential to add extra cost on the steel major's operations, as an added reason for the layoff.


"EU carbon legislation threatens to impose huge additional costs on the steel industry," Kohler said.


Meanwhile, the company feels that its investment in the long products range will be beneficial in targeting high-value markets and give it greater flexibility in cost and operational savings.