The government has announced a last-ditch package of rescue measures in a bid to attract potential buyers for Tata Steel's UK operations, including the Port Talbot steelworks.
The plans, which amount to a “part-nationalisation” of the troubled steel industry, would see taxpayers take a 25 per cent stake in any rescue of Tata Steel’s UK operations with the government providing debt finance worth hundreds of millions of pounds to potential buyers.
Business secretary Sajid Javid said the money would be offered on commercial terms, but the government would not have any control over the business.
It is feared that without such support, tens of thousands of jobs will be lost in steel manufacturing and the wider supply chain. However, the proposals have been criticised by economists as “misguided”, and “a gamble”.
Mark Littlewood, director general at the Institute of Economic Affairs, said: “It is severely misguided of the government to gamble with taxpayer’s money in the hope that the industry will be revived against all odds. Unfortunately, the problems of UK steel are structural, not cyclical. With energy, labour and other production costs much higher than those in say China or Germany, it is very unlikely the UK steel industry is viable over the long term without a dramatic change in tax and energy policies.”
Ben Southwood, head of research at the free-market Adam Smith Institute, said: “Stepping in to part-nationalise Port Talbot and other Tata Steel operations in the UK, as well providing hundreds of millions of pounds of debt finance, will make Britain poorer in the long run and keep steelworkers dependent on state aid for the foreseeable future.”
Ministers have been seeking bidders for the loss making UK operations of Indian steel conglomerate Tata since it announced its intention to shut the plants last month.
Javid said yesterday: “This government is committed to supporting the steel industry to secure a long-term viable future and we are working closely with Tata Steel UK on its process to find a credible buyer. The detail of our commercial funding offer is clear evidence of the extent of that commitment.”
Steel trader Liberty House, owned by Sanjeev Gupta, has been the most high profile potential bidder.
A Liberty House spokesman said yesterday: “The UK government announcement is interesting and encouraging and will help our team with their analysis of the Tata opportunity.”
Meanwhile, Tata Steel’s Port Talbot chief Stuart Wilkie this week put forward an alternative proposal of a management buyout of the company’s operations in the UK.
Welsh billionaire Sir Terry Matthews has told Sky News he would be willing to put forward some of his own money to help a management buyout. Matthews said he believes plants like the one in Port Talbot can return to profit, and is backing a bid which could potentially save thousands of jobs. He said: “I think I would [put up his own money], and I mean not that I have to, if something's a good deal for financial investors, it’s not difficult to finance.”