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Government could take 25% stake in Tata UK after steel financing package agreed

Manufacturing bodies have welcomed the government’s offer of financial support to any potential buyers of Tata Steel’s UK business.

Business secretary Sajid Javid today announced that the government would provide debt financing or take up to 25 per cent of Tata Steel UK to encourage “a credible private buyer” to come forward.

Terry Scuoler, chief executive of manufacturers’ body EEF, called the move “a welcome and extremely positive statement of intent”.

He added: “The government has said that it is committed to the importance of the steel sector in the UK as a strategic national asset and this announcement shows that it is prepared to put money and action in place to back its words.

“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 in south Wales and in the wider UK.”

The offer to invest in Tata’s UK plants comes after a month of talks between the government and the Indian conglomerate following its decision to put the business up for sale.

Up to 15,000 jobs are thought to be at risk, with 4,000 alone at Tata’s Port Talbot works in south Wales.

UK Steel director Gareth Stace said: “We have been calling for government to step up to the mark and provide this type of financial commitment and backing.

“This is a positive first step which will provide the certainty and continuity that should enable credible investors to come forward and provide a sound future for steel-making in the UK.”

However, Mr Stace said more needed to be done to help the industry, which has suffered from high energy costs and an influx of cheaper imported steel.

“Further action is still needed on energy costs and business rates,” he continued. “At EU level, we still need to see tougher action on the dumping of cheap imports. This will then provide the level playing field which will give UK companies a fighting chance to compete.”

So far, only the Gupta family-owned Liberty Group has put its hat in the ring as a potential buyer, although it is not certain the company will make a move for Tata.

Yesterday, reports emerged suggesting that Stuart Wilkie, the managing director of the Port Talbot plant, was mulling a management buyout of the UK business.

Making today’s announcement, Mr Javid said: “This government is committed to supporting the steel industry to secure a long-term viable future and we are working closely with Tata Steel UK on its process to find a credible buyer. The detail of our commercial funding offer is clear evidence of the extent of that commitment.

“Ministers have visited Tata Steel sites across the country and the pride and dedication of the highly skilled men and women working there is obvious to see.”

The financial support package will be provided by both the UK and Welsh governments, which will also be willing to consider additional grant funding support to support infrastructure associated with the plants.

The European Investment Bank is also considering offering financing to new investors in the UK’s steel industry.

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