Unions have welcomed Tata Steel’s progress in creating a new standalone long products division.

Tata Steel this week notified employees of whether or not they would be transferred from the Long Products Europe to Long Products UK Ltd, a wholly owned subsidiary of Tata Steel, proposals for which were announced earlier this year, the union Community said in a statement, welcoming the news.

Creating the subsidiary was one of the recommendations of a report by Syndex, financial and business consultants commissioned by the unions to look at alternatives to the sale of the long products division to the Swiss-based Klesch Group.

Tata Steel announced due-diligence on the potential sale of the division in October last year, as part of a strategy to focus on strip steel, and create a “competitive” base.

The Syndex report listed the creation of a standalone business as one option and in March Tata Steel and the unions agreed to explore the creation of the subsidiary.

“This move is aimed at creating a more flexible and independent framework for the business to operate in and for strategic options to be progressed, including those contained in the report drawn up by the unions' consultants, Syndex, which the company gave serious consideration to,” Tata Steel said in a statement on Thursday.

“Since then, the company has entered into a consultation process about the proposed transfer with affected employees and their union representatives.”

While Tata Steel's discussions with Klesch continue, unions welcomed the steel giant’s decision to adopt the recommendation.

A spokesperson for Community union said the creation of the subsidiary would help create a smaller, more sustainable business.

“It creates more opportunities for the new company to access investment, and potential statutory funding for capital expenditure around environmental issues, which Tata is too big for. It’s about creating a business small enough to have more opportunities to apply for government funds.”

“We will be supporting our members through the transfer process and working with the new company to give it every chance of success at creating a sustainable business within Tata Steel for the long term,” Community General Secretary Roy Rickhuss said in a statement.

Employees will remain members of the British Steel Pension Scheme.

Members of the four unions representing Tata Steel’s UK employees, including Community, are currently being balloted for industrial action, over Tata Steel proposals to close the defined benefit pension scheme, and move members to a defined contribution scheme.

The current pension scheme has a deficit in the region of £2 billion, as a result of employees living longer, and a tepid financial market.

Three of the unions will declare their results on Friday, with a fourth union, announcing its results in early June.

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