UK announces Tata Steel buyer support package

Article by Staff Writer

THE UK and Welsh governments have announced that they could take a minority stake of up to 25% in Tata Steel’s UK operations as part of a support package for potential buyers of the business.

Hundreds of millions of pounds of support will be made available to the buyer, and the package, available on commercial terms, will be tailored to the buyer’s needs. The governments expect that most of the support will come in the form of debt financing. However, as well as the offer of taking a minority stake, they will also consider providing hybrid debt or other alternative forms of finance.

Both governments have also said that they will consider offering additional grants, such as for work on power plant infrastructure, energy efficiency or environmental protection measures, research and development or staff training. The UK government is also working with Tata Steel and the British Steel Pension Scheme’s trustees in an effort to minimise the impact of pensions on a potential buyer.

UK business secretary Sajid Javid has held talks in Mumbai, India, this week with Tata global chairman Cyrus Mistry to discuss the ongoing sales process. Tata has not confirmed what companies it is in discussions with, but confirmed that it has contacted 190 potential bidders. Two potential bidders have come forward to the UK media, one of which is Liberty House, led by CEO Sanjeev Gupta, while the managing director of Tata’s UK strip steel business, Stuart Wilkie, has launched plans for a management buyout.

“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 operations in Wales and the rest of the UK,” said Welsh first minister Carwyn Jones.

The UK government has repeatedly rejected calls to re-privatise the UK steel industry, which in the past year has suffered as a result of high production costs, the low international steel price and imports of cheap, subsidised steel from China. Tata Steel has cut almost 3,000 jobs, while the closure of SSI’s Redcar steelworks saw the loss of 1,700 jobs.

The news of the support package has been welcomed by steelworkers. Roy Rickhuss, general secretary of steelworkers’ union Community, said that it is a “clear commitment” to help the steel industry.

“We have been clear from the start that this steel crisis should not become a political football and we welcome the fact that the UK and Welsh governments have taken this joint approach to such an important issue for our country,” he added.

Shadow business secretary Angela Eagle was a little more cautious, warning that the package alone would not be enough to save the UK’s steel industry. She says that the government will need to address the underlying challenges facing the industry, including energy costs, business rates and the “dumping” of cheap Chinese steel imports.

“Whether you call this ‘co-investment’ or part-nationalisation, it is a long-overdue recognition of the need for government support for the sale process. Labour and the steel unions have been calling for action for weeks; this appears to be a step forward,” she said.

Article by Staff Writer

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