MUMBAI/LONDON (Reuters) - Tata Steel UK has signed a 100 million pound deal to sell its speciality steel business to Liberty House Group, as the firm's Indian owner Tata Steel Ltd (>> Tata Steel Limited) presses on with restructuring its European operations.

The deal, which is subject to regulatory clearances, secures 1,700 jobs, mostly in South Yorkshire in the north of England, Britain's largest steelmaker said in a statement on Thursday.

The speciality division is one of the world's biggest suppliers for the aerospace industry, with customers including Rolls-Royce (>> Rolls-Royce Holding PLC), Boeing (>> Boeing Co) and Airbus (>> Airbus Group).

"This is an important step forward in securing a future for the (speciality) business. Today's news also marks another important step forward in realising a more sustainable future for our Port Talbot-based supply chain in the UK," said Bimlendra Jha, chief executive of Tata Steel UK.

The deal will make privately-owned Liberty House one of Britain's largest steel employers with 4,000 workers. The speciality business has the capacity to make 1.1 million tonnes of liquid steel a year from recycled scrap.

On completion of the deal, Tata Steel will employ some 9,000 people in Britain, around half of them based in Port Talbot, Wales, home to Britain's largest steelworks. For every steel job saved, around four jobs are retained in related sectors.

UK Business Secretary Greg Clark said: "I look forward to hearing more about (Liberty House's) expansion plan. We want to work with the steel industry to transform and upgrade their sector as part of the (government's) Industrial Strategy."

Tata Steel Ltd, India's biggest steelmaker by overall capacity, is in talks to merge its European operations, including its remaining British businesses, with Germany's Thyssenkrupp (>> ThyssenKrupp AG).

The success of the talks hinges on Tata getting regulatory approval to spin off its 15 billion pound pension scheme into a standalone entity, because Thyssenkrupp will not take on the British unit's pension liabilities in the event of a merger.

Tata Steel said it was seeking to develop a "structural solution for its UK pension scheme in the coming months", and it was also consulting employees on how to secure a sustainable future for its remaining British business.

The steelmaker's British employees have been balloted on closing the pension scheme to future accrual, with vote results due this month. But that is only the first step towards separation of a scheme that has 130,000 members.

Liberty House, part of the Gupta Family Group, expressed an interest in buying all of Tata Steel UK last year, before Tata Steel Ltd decided against a sale of the whole business in order to pursue a tie-up with Thyssenkrupp.

(Corrects wording of first paragraph)

(Reporting by Devidutta Tripathy; Editing by Mark Potter and Adrian Croft)

By Maytaal Angel and Devidutta Tripathy