Tata Steel warns suppliers over prices

Tata Steel has warned suppliers that if they don't slash prices by 30% then they risk losing Tata's business.

The company's Long Products division, which supplies steel beams, railway tracks and other products, has written to its suppliers asking for a 30% cut in prices in the long term.

It wants an "immediate" price reduction of 10% on all purchases.

The company says market conditions have led to a "difficult business situation" at Longs Steel UK.

Tata says it is trying to transform the business but said it needs support from its "valued" suppliers.

The letter says: "Should you - for any reason - be unable to support us in our efforts, we will need to fully consider other options."

Unprecedented demand

One recipient of the letter was Neil Smith from recruitment business Kinetic.

He said that in his 23 years as the company's boss he has "never received anything like this".

"You don't have valued suppliers offering valued services and then turn around and say take a 30% cut. That goes against any business maxim on the planet," he told the BBC.

In response a Tata Steel spokesman said: "Our Long Products unit has been in dialogue with suppliers for a month. Initially some were spoken to directly, others were contacted by letter to begin a consultation process.

"We have had an excellent response with positive and innovative ways we can work together.

"The current position in UK steel is no secret and has been explained in all communications with all partners."

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'Deeply concerned'

The Federation of Small Business said it recognises the challenges faced by the steel industry but called for Tata to treat its suppliers with "utmost sensitivity".

John Allan, national chairman at the Federation of Small Businesses, said: "The FSB has consistently condemned the practices of some large companies towards their supply chains and we are deeply concerned by this latest example.

"Small businesses rely on the integrity of their bigger customers when it comes to honouring agreed contracts and paying up in full and on time."

Last month Tata Steel announced nearly 1,200 job losses at its plants in Scunthorpe and Lanarkshire.

Nine hundred jobs will be lost at the firm's plant in Scunthorpe. The remaining 270 jobs will go in Motherwell and Cambuslang.