UK government mulls co-investing in steel plant to save it

AP News
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Posted: Apr 11, 2016 2:28 PM

LONDON (AP) — The British government says it is willing to put public money into a deal to save steel plants threatened with closure amid a glut of cheap Chinese imports.

Business Secretary Sajid Javid told the House of Commons on Monday that the government was prepared to co-invest with any buyer of the plants Tata Steel plans to sell. These include the U.K.'s largest steelworks, at Port Talbot in South Wales, which employs 5,500 workers.

"I've been in contact with potential buyers, making clear that the government stands ready to help," Javid said. "This includes looking at the possibility of co-investing with a buyer on commercial terms."

Javid's comments underscore the importance the government has put on ensuring the U.K. steel industry survives as a source of employment and raw materials for the nation's economy. Tata Steel last month said it planned to sell the company's operations in Britain because of losses estimated at 1 million pounds ($1.42 million) a day. The announcement came after Sahaviriya Steel Industries shut its Redcar plant in October, eliminating 2,200 jobs.

While the government has resisted calls from unions and opposition politicians to nationalize the Port Talbot plant, Javid left open that possibility in his remarks on Monday.

"We haven't ruled anything out; I've been clear about that," he said. "But what we're also very clear on is that the best way forward ... if you look at the best steel operators in the world, they are commercially run, they're privately run. Nationalization is rarely the answer."

In a separate development, Tata agreed Monday to sell its European long products unit to a London investment firm, safeguarding 4,800 jobs in England and France.

The sale of Tata's Scunthorpe works in northern England and associated operations to Greybull Capital has been nine months in the making and is separate from the U.K. government's effort to save the Port Talbot plant. It will be rebranded as British Steel upon completion of the deal in eight weeks.

Tata said the unit, which makes plates, rods and semi-finished steel for industries such as construction and shipbuilding, will be sold for a nominal sum, though Greybull will take on "relevant liabilities." Greybull said it is arranging a 400 million pound ($569 million) investment and financing package.

"We are now focused on taking the deal to completion in order that the business can start its next chapter with confidence," said Marc Meyohas, a Greybull partner.

Tata Steel on Monday started the formal process of selling the bulk of its U.K. operations. So far, London-based Liberty House is the only company to express interest in Port Talbot.

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Jill Lawless in London contributed to this report.