The David Cameron government on Thursday said it would be willing to take a 25% stake in any rescue package of Tata Steel’s UK assets, offering new hope to the beleaguered steel industry, which has been hammered by a surge in cheap Chinese imports, soaring costs and weak demand.
After a management buyout package was revealed for strip operations at Port Talbot in Wales on Wednesday, the prime minister’s spokeswoman said the government would invest on a commercial basis, but would not be in a ‘controlling’ position.
The announcement provided more details on the possibility of ‘co-investing’ that business secretary Sajid Javid revealed in the House of Commons last week. The government has been under considerable political pressure to rescue Britain’s steel industry.
Tata Steel recently decided to sell its assets in Britain after losses mounted to £1 million a day.
Asked if the minority stake would amount to ‘part-nationalisation’, the spokeswoman said: “If we were to take an extra stake it would be a minority one with the aim of supporting the purchaser in delivering a long-term future for the business. We are certainly not seeking to be controlling the company”.
“I am not sure we would accept the concept of ‘part’ nationalisation. We will be investing on a commercial basis. We would not see this as nationalisation. We would not be seeking to acquire a control in the business. We don’t think that nationalisation is the right answer,” she added.
The package of support worth hundreds of millions of pounds will be made available from the UK and Welsh governments. The announcement follows a second meeting between Javid and Tata Sons chairman Cyrus Mistry in Mumbai early this week.
The financial support package will be tailored to the purchaser’s strategy and financing needs. However, it is expected that all, or the large majority, will be through debt financing, official sources said. Other options included providing hybrid (convertible debt) or alternative forms of financing; supporting a purchaser’s financing by taking a minority equity stake (up to 25%) and acting in support of the purchaser, sources added.
First Minister of Wales Carwyn Jones said: “We’re committed to supporting any credible bid to secure steel making in Wales. We have worked with the UK government to put in place this significant package of support and we believe that this will help secure a successful sale of Tata Steel’s UK operations.”
In addition to the support package, the UK and Welsh governments will also consider additional grant-funding support, for example, to support the development of power plant infrastructure, energy efficiency and environmental protection measures, research & development (R&D) and training, sources added.