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UK Government Willing to Take 25% Stake in Tata Rescue Deal

As Tata continue to court buyers for their Port Talbot steel operations, much has been made of the necessity for some kind of governmental support for a deal to go through successfully. Previously, Sajid Javid said that a partial investment would be something that the government could be amendable to, but there remained a distinct reluctance to officially support anything.

Now, in a shock move, the government have announced that they are willing to take a 25% stake in any rescue of Tata Steel’s UK operations. The business department said that it was preparing to make a support package “worth hundreds of millions of pounds” available to potential buyers in order to secure the safety of not just Britain’s steel industry, but also the tens of thousands of jobs that are at risk both in the business and supply chain.

The Business Secretary, Mr Javid, said that the money would be offered on commercial terms, but that the Government would have no hand in the actual control over the business. In addition to taking over a minority stake in the operation, the UK and Welsh government said they would also be willing to consider additional grand funding support. That could mean money to support the development of power plant infrastructure, energy efficiency and environmental protection measure, R&D or training.

There are at least two parties currently interested purchasing Tata’s Welsh operations. The first option is a management buyout backed by the chief of Tata’s Port Talbot factory, who put forward a rescue plan to Tata before the company up for sale, which was swiftly rejected. The second option comes in the form of the steel company Liberty House, owned by Sanjeev Hupta, who declared an interest in purchasing part of the business.

The Prime Minister’s spokeswoman told a media briefing that the support was being offered “in order to keep the operation safe”. The went on to say "We would work alongside a potential buyer to make sure that the government is doing what it could to support a viable sale, 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."

When quizzed if this was part-nationalisation, she suggested not, saying “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.”

Meanwhile, UK Steel have welcomed this move as a positive first step, but suggest that further action has to be helped, in particular in regards to energy costs for steel producers and eco-targets. Former Business Secretary Sir Vince Cable has sad that the UK’s offer to help is a good one, but warned that there were still “a lot of hurdles to overcome”.

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