UP to 70 jobs could be axed at a fledgling steel firm.

British Steel has revealed plans to restructure plants in Darlington and Skinningrove, east Cleveland.

Bosses, who have been warned by a union to avoid compulsory redundancies, say staff will be replaced by machinery to help make the business more competitive.

The proposals, which come after officials pledged a company-wide £40m investment, are a further blow to the North-East steel sector, which was previously rocked by the collapse of Redcar steelmaker SSI UK that left thousands unemployed.

However, British Steel, founded last year out of Tata Steel’s loss-making Long Products division, insists the changes, which will affect its special profiles business, will be positive in the long run, with officials revealing they hope up to 20 workers will transfer to jobs at its sister Teesside Beam Mill in Lackenby, near Redcar.

The blueprint comes after the business, which ended its third quarter in profit, unveiled plans to spend £1.8m on new apparatus at Skinningrove to improve the surface quality of parts for the forklift truck and excavator bucket markets.

It has also announced a raft of contracts, with its Beam Mill lined up to roll steel for Scunthorpe United’s new 12,000-seat football stadium after overseeing work on sections for Belfast’s 23-storey Grand Central Hotel.

However, Peter Gate, managing director for special profiles, which oversees products such as crane rails, excavator track shoes and wear-resistant steel for underground and mining use at Skinningrove and Darlington, said changes were essential if the business was to build on its promising start.

He said: “We’re striving to become a global leader in special profiles but to do this, and deliver the high standards customers quite rightly expect, we need to be more flexible and efficient.

“In recent years, prior to the launch of British Steel, the special profiles business hadn’t been profitable.

“It’s encouraging that we’re now making a profit but we must become even more competitive if we are to grow and win more orders.”

Mr Gate confirmed the company will speak to unions about the changes at special profiles, which employs 331 people, including 24 at Darlington.

He said: “We’ve explored a number of options but this strategy is the one we feel best suits the future needs of our business and customers.

“We will be working closely with our unions to determine how we reduce our overheads, including employment costs.

“I understand this news will be upsetting for those people affected, however, we will give them all the support needed and have already identified up to 20 opportunities at our Teesside Beam Mill.”

British Steel’s arrival in the region, coming after its owner Greybull Capital paid £1 for Long Products, had provided some cheer for a steel sector hit hard by SSI’s troubles.

Tom Blenkinsop, outgoing MP for Middlesbrough South and east Cleveland, who has sat as chairman of the All-Party Parliamentary Group on Steel, said he hoped British Steel would stay true to its word.

He said: “More job losses in our steel community are hard to take and I hope those losing their jobs will find new employment soon.

“The steel industry can’t afford to continue losing the skills and experience of these people; I hope British Steel’s plan means more secure jobs on Teesside in the future.”

However, Paul Martin, British Steel managing director, moved quickly to ease fears the job changes, which, if implemented, will be ushered in over a two-year period, could be the start of wider losses, saying the business is focused on growth.

He added: “While we have pledged nearly £40m of investment and welcomed hundreds of new people to the business, there are still many challenges.

“We’re not proposing job losses in any other areas and passionately believe we can build a sustainable future.”