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Britain could offer loans to tempt buyer for Tata steel plant

International Business
Wed, 13 Apr 2016
Reuters


Britain said it could offer state loans to tempt a private bid for Tata's loss-making Port Talbot steelworks as Prime Minister David Cameron scrambles to save at least 10,000 jobs thrown into jeopardy by a global steel crisis.

Britain is battling to save a once mighty steel industry after Tata Steel announced it was putting its British steel operations up for sale, citing a surge in cheap Chinese imports, soaring costs and weak demand.

The Indian conglomerate reached a deal to sell one of its plants in northern England on Monday, but Cameron is under pressure from unions and the opposition Labour Party to ensure that Tata's other British steel assets are sold to save thousands of jobs.

Business Secretary Sajid Javid even opened up the possibility of the state taking a stake in Tata's flagship Port Talbot plant in south Wales.

"The key point is any investment would have to be on commercial terms," Javid told parliament on Tuesday.

"Investment can take a variety of forms – for example it could be debt," Javid said, adding that it would not be correct to give details of the plans at this stage.

A government source, who spoke on condition of anonymity due to the sensitivity of the situation, said that a government loan as part of a deal with other investors was the "likeliest scenario" for the purchase of the steelworks.

The source said that there was only a remote possibility that the state would end up taking an equity share in the Port Talbot operation.

Still, a Conservative government floating the possibility of taking equity in ailing steelworks once privatised by former Prime Minister Margaret Thatcher underscores the seriousness with which Cameron is treating what the Labour Party called a national emergency.

Both Cameron and Javid have pitched themselves as heirs to Thatcher, who during her time in office in 1979-1990 privatised British Steel and sold off government stakes in loss-making national champions.

Javid, who keeps a portrait of Thatcher in his office, said on Monday that nationalisation was "rarely the answer" but ruled nothing out, while Cameron's spokeswoman said: "Nationalization is not the right answer."

As many as 15,000 jobs were put at risk when Tata announced on March 30 that it was selling its British steel operations.

"This is a human tragedy," Javid said. "When we talk about job losses in the abstract it is easy to forget that each of them represents a person. A hardworking, highly skilled man or woman."

Under a deal struck on Monday, Tata agreed to sell a steelworks in Scunthorpe, northern England to investment firm Greybull Capital for £1, saving around 4,400 jobs.

But more than 10,000 jobs remain at risk at other Tata plants across Britain and the complexities of taking on a loss-making steel enterprise amid soaring Chinese exports of the metal mean the government is under pressure to clinch a deal.

The crisis comes as Britain faces a referendum on June 23 on its membership of the European Union and a debate on steel in parliament on Tuesday descended at times into an assessment of the merits of EU membership.

The government was criticised by lawmakers for failing to halt Chinese imports and moving too slowly to stem the crisis.

"The situation now facing the steel industry cannot be categorised as anything other than an emergency," Angela Eagle, Labour's business spokeswoman.

She called on Javid to clarify his plans for the future of steelmaking, saying that the industry was "hanging by the thinnest of threads".

"Call it what you like – co-investing, part-nationalisation, temporary public stewardship, or sheltering the assets – it's clear that circumstances may require the government to do this. They should spare their ideological blushes and just get on with it," Eagle said.

After Britain asked China to tackle the problem of oversupply, Beijing said it wanted to work with the rest of the world to find a resolution to overcapacity in the steel sector.

China makes half of the world's steel and produced 803.8m tonnes in 2015. That was almost eight times the output of Japan, the No. 2 producer, and nearly 20 times that of Germany, Europe's biggest producer. 

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