A STEEL firm has unveiled plans to create a new business, raising hopes for the futures of hundreds of North-East workers.

Tata Steel says it will make its Long Products (LP) division a standalone subsidiary in its European operations.

The switch to the new business, known as Longs Steel UK, is expected to be finalised next month, with bosses hoping it will help attract state funding.

Union officials have reacted with delight, saying the recommendation was put to the company earlier this year in a report set up to find other options to an LP takeover bid from US billionaire Gary Klesch.

Fears had been raised over jobs at LP, which employs about 750 North-East workers and includes the Teesside Beam Mill, at Lackenby, near Redcar, after Tata last year opened talks to sell it to Mr Klesch, a former Ohio steel mill electrician.

The firm says it will continue talking to Mr Klesch.

However, according to the Community union, which represents the majority of affected staff, Tata has now written to staff to let them know if they will be moving to the new company or remaining part of its UK’s business.

Roy Rickhuss, Community general secretary, added: “We are pleased Tata has taken forward one of the key recommendations of the Syndex report into alternatives to the Klesch Group sale.

“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 in Tata Steel for the long-term.”

In a letter to staff, the steel firm confirmed the transfer to the new company will take place late next month.

It added: “The proposal envisages extending investment in LP over time by securing third-party support, including potentially through public support and that a standalone LP may lead to an improvement in the business.

“Tata agrees LP can be improved and that a standalone business will facilitate external investment and cost reduction.

“While Tata will continue to pursue the potential sale to the Klesch Group, it has decided to transfer, with the agreement of the trade unions, ownership of LP into a newly-created company.”

The news comes a day before union ballots close on potential strike action at Tata, over an ongoing pensions row.

The National Trade Union Steel Co-ordinating Committee (NTUS), which includes Community, GMB, Ucatt and Unite, has urged staff to walk out, branding Tata a sham for its handling of consultation over potential changes to the British Steel Pension Scheme (BSPS).

If workers take action, they will join the first national dispute in more than 30 years.

The BSPS had 143,000 members as of late last year, with assets of about £13.6bn.

However, Tata previously warned its pension fund was facing a major shortfall, and has proposed various changes, including the removal of early retirement enhancements, which could force people to work until they are 65.

Tata, whose Long Products division also includes a special profiles plant, in Skinningrove, east Cleveland, said it is looking to reduce any impact on staff, adding it is still open for talks.

However, Community, GMB and Ucatt have all sent out papers to members, with ballots due to end on Friday, May 29.

Unite’s result will close on Friday, June 5.

Referring to the consultation process, an NTUS spokesman added: “The entire individual consultation process is a sham and Tata has taken no notice of the views of their employees.

“In light of this flagrant disregard, all unions are united in their call for members to vote yes for industrial action.”