Business secretary Greg Clark is set to announce a £100m funding package for British Steel.
Sky News reported that Clark will announce the pledge in the House of Commons tomorrow after the UK’s second-biggest steelmaker made the request for emergency funding to pay an EU climate levy.
According to the report, government funding has been used to acquire carbon credits on behalf of British Steel before surrendering them to regulators.
The company has reportedly signed a deal with the Business, Energy and Industrial Strategy (Beis) department to repay the money on commercial terms over the next few months.
Ministers engaged accountancy firm KPMG to advise them, but concluded that as the money will be paid back on commercial terms there would be no state aid barriers to the deal.
British Steel owns the giant Scunthorpe steel plant and employs 5,000 people.
The company is owned by investment firm Greybull Capital which acquired it from India’s Tata Steel in 2016 as it teetered on the brink of closure.
British Steel’s need for extra funding is in part caused by Brexit, with UK companies locked out of the latest version of the EU’s carbon emissions trading system.
A Beis spokesperson said: “As the business department, we are in regular conversation with a wide range of companies.”