Steel crisis: Four things that could happen to Tata steelworks next

Jessica Morris
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Commodities investor Liberty House has emerged as the most likely buyer (Source: Getty)

The government has been forced to hold a crisis meeting, while dissatisfaction among unions, business groups and the opposition continues to rise. With thousands of British jobs at stake, what could happen to Tata's embattled UK business?

Full or partial sale

In an ideal world, Tata would be able to find a buyer for its stricken UK business, clearing the current storm. However, so far investors have shown little appetite for this.

It's hardly surprising given the company's finance director, Koushik Chatterjee’s, admission that it’s been forced to writedown this part of its business to “almost zero”.

And while commodities investor Liberty House has emerged as the most likely buyer, its interest is hinged on what Tata and the government would do.

It also signalled it could look at the products side of the business, but not the steelmaking facilities themselves, which present a “huge challenge”.

Tata sites in Lanarkshire and Scunthorpe are currently in the process of being sold to Liberty Group and Greybull Capital.

Management or employee buyout

One way to potentially cure a seemingly sickly business is through an employee buyout.

An employee buyout typically involves selling a majority stake in a company (healthy or otherwise) to its employees.

MSPs called on a taskforce set up to save Scotland’s steel industry to seriously consider an employee buyout helped by a state loan last year

Full or partial nationalisation

One of the more politically contentious ways to save Tata's UK assets would be a full-scale nationalisation by the government.

Prime minister David Cameron has said he's "not ruling anything out" - however he indicated that a full scale nationalisation is off the cards.

Anne Soubry, the business minister, also pointed out that the government will struggle to take full ownership of Tata due to EU competition law.

She also added that the government could temporarily prop up Tata until a buyer is found.

Meanwhile, Labour hasn't yet ruled out nationalisation, however they want the government to explore short-term solutions such as help with high energy costs first.

Mothballing or allowing it to close

Tata's UK steelworks could be mothballed, which would involve preserving the facilities without using them for production.

Nevertheless, this would only be effective when the glut of cheap steel seeping out of China eventually ends.

And is doesn’t do anything to address the ongoing problem of China dumping its steel onto global markets at comparatively low prices.

This is why some commentators have said that the government should allow the plants inevitable closures, and instead divert resources to more productive things such as retraining former employees.

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