Britain’s largest steelmaker Tata Steel has confirmed that it is seeking government support amid reports that it is close to securing a rescue worth hundreds of millions of pounds.
According to the Financial Times, a bailout deal could be agreed in a few days, which would help save some 8,000 jobs in the UK.
The steel industry was suffering before the pandemic, but demand has now sunk.
“We have been and continue to seek government support in the UK … and in all geographies in which we operate,” Tata said.
Tata Steel said “it would not be appropriate to comment on the ongoing discussions with governments.”
According to the FT, the ransom would take the form of a loan that could be converted into equity at a later date, in case Tata was unable to repay it.
- The steel sector needs help in days, not weeks, says MP
- Tata Steel ‘needs £ 500m government support’
That would mean the government could take a stake in British steel for the first time in 30 years.
The government said it was “in regular talks with companies in various sectors.”
“We do not comment on the commercial or financial affairs of individual companies,” he added.
The loan would support Tata Steel’s UK operations, which include its main Port Talbot plant in Wales, but also sites in other parts of Wales, Hartlepool and Corby.
Tata has been looking for a £ 500m state loan, according to Stephen Kinnock, a Labor MP from Aberavon, where Port Talbot is located.
The FT says Indian-owned Tata is expected to sign up to various commitments to its workers and cut carbon emissions as part of any deal.
The bailout loan would be the first under the government’s Birch Project scheme, which is designed to save large companies that cannot get the support they need through existing schemes.
Aviation and the aerospace sector are reported to be among other sectors that may require “custom” bailouts.
Like other UK steel operators, Tata Steel has been hit hard by rising production costs and international competition in recent years and has struggled to make a profit.
It suffered a pre-tax loss of £ 371 million in 2019 amid continued uncertainty about Brexit.
However, since the pandemic hit, the demand for steel has dropped dramatically as industries like auto manufacturing have stopped.
‘Cost of doing nothing’
Kinnock has urged the government to intervene to support steel companies, warning that many could withdraw, costing thousands of jobs.
“Imagine the cost of losing those jobs … So we are telling the government to grant the temporary loan,” he told the BBC on Sunday.
“It is a loan that will be repaid to avoid the massive cost of doing nothing.”