UK Most Likely to Offer Loan to Help Tata Steel Plant Investment
Britain could offer a state loan on commercial terms to help tempt a potential purchaser for Tata Steel’s Port Talbot steelworks, a government source told Reuters on Tuesday.
Prime Minister David Cameron, who has called a referendum on EU membership for 23 June, is under pressure to keep Tata‘s British steel plants open after the Indian conglomerate said last month that it was selling up in Britain.
Though Cameron has said nationalisation is not the right answer, Javid’s comment on co-investing was interpreted by The Financial Times and The Guardian newspapers as opening up the possibility of the state taking an equity stake in Port Talbot.
The government source, who spoke on condition of anonymity due to the sensitivity of the situation, said that there was only a remote possibility that the state would end up taking an equity share in the Port Talbot operation.
The source said that a government loan as part of a deal with other investors was the “likeliest scenario” for the purchase of the steelworks.
For free-market politicians such as Javid who has styled himself as an heir to former Conservative Prime Minister Margaret Thatcher, nationalisation is ideologically unpalatable.
Announcing its decision to pull out of the UK in March, Tata said it could no longer endure mounting losses caused by increased shipments to Europe from countries like China, high manufacturing costs, and domestic market weakness.
Nevertheless, the government says it is hopeful of finding another buyer, although that process could take some time given the complexity of any deal, including negotiations over everything from pensions liabilities to energy subsidies.
On Monday, Tata agreed to sell a steelworks in northern England to investment firm Greybull Capital for 1 pound on Monday, saving a third of the job at risk in Britain.