The U.K. Serious Fraud Office opened a criminal investigation after Tata Steel Ltd. identified a lapse in procedures at its Speciality Steels business through an internal audit in 2015, the company said in an exchange filing Saturday.
“Certain inappropriate testing and certification procedures at the South Yorkshire-based Speciality Steels business were identified” in the audit, the company said. “Amongst other bodies proactively notified by Tata Steel UK was the Serious Fraud Office, which has opened a criminal investigation.”
The company immediately stopped the practices after an internal investigation, and suspended a number of Speciality Steels personnel, according to the statement. The investigation found that the “steel affected and supplied was always well within safety margins,” Tata Steel said.
The Serious Fraud Office said on Friday it had started the probe into activity at the company’s Speciality Steels unit in December.
The Mumbai-based steel manufacturer is scheduled to begin talks next week with Liberty House Group about selling its Port Talbot plant and its British processing operations, as it seeks to exit its U.K. businesses.
Prospective buyers for the U.K. division “can raise some concerns because of the liabilities” arising from the investigations, Goutam Chakraborty, an analyst at Emkay Global Financial Services, said by phone from Mumbai. “If it is a serious thing then it will give the buyers more bargaining power and make things a little more complicated.”
The Indian producer said last week it’s considering selling its unprofitable U.K. division, citing global oversupply, high costs and rising steel exports that mean trading conditions in the U.K. and Europe have deteriorated. The move may jeopardize about 40,000 jobs.
British Foreign Secretary Philip Hammond said Saturday he had raised the issue of steel production over-capacity during talks with Chinese Foreign Minister Wang Yi in Beijing.
“I urged China to accelerate its efforts to reduce levels of steel production,” Hammond said. “The U.K.’s focus is on finding a long-term sustainable future for steel-making at Port Talbot and across the U.K., and I welcomed the potential interest of Chinese companies in investment in U.K. steel-making.”
Steel companies across the globe are having to find ways to deal with the impact of a heavily oversupplied market on their balance sheets. Tata Steel is said to be in advanced talks with ThyssenKrupp about starting a join venture between some European businesses. ArcelorMittal successfully completed a $3 billion rights issue on Monday, while Vallourec started a 1 billion euro capital raise Friday.