Britain has said it could take an equity stake of up to 25 percent in Tata’s UK steel assets as part of a package of hundreds of millions of pounds of financing to help support a potential buyer.
The Indian group announced plans to exit its entire British steel operation last month, leaving the government battling to save a once mighty industry that has been hammered by a surge in cheap Chinese imports, soaring costs and weak demand.
Prime Minister David Cameron is under pressure from trade unions and the opposition Labour Party to ensure that a buyer is found to save the more than 10,000 jobs at risk.
The government said exactly what support it provided would depend on the purchaser, but that it would be on commercial terms and was most likely to be debt financing. Taking an equity stake was also an option, it said.
“If we were to take an equity stake it would be a minority one with the aim of supporting the purchaser in delivering long term future for the business. We are certainly not seeking to be controlling the company,” Cameron’s spokeswoman said.
The Business Ministry said in a statement the government could take a stake of up to 25 percent in the assets.
Cameron’s spokeswoman said the government did not view this as part-nationalisation as it would be investing on a commercial basis and wasn’t seeking control over the business.
“We don’t think that nationalisation is the right answer,” she said.
The announcement was welcomed by manufacturers’ organisation EEF as “extremely positive”.
“This should put in place the building blocks which should encourage potential investors to come forward to co-invest with government to ensure a viable future for the steel sector,” EEF Chief Executive Terry Scuoler said in a statement.
The government also said it was working with the pension scheme trustees of Tata Steel and British Steel to minimise any pension impact on the purchaser, potentially separating it from the business.
Greybull Capital, which earlier this month bought the Indian company’s Long Products Europe division in Scunthorpe, northern England, has been reported to be considering making a bid for Tata’s speciality steels arm.
Sanjeev Gupta, the boss of metals trader Liberty House Group, has also expressed an interest in Tata’s UK assets, while senior staff at Tata’s loss-making Port Talbot site in Wales, Britain’s biggest steel works, are seeking to launch a management buyout plan.