Government outlines details of financial support for Tata Steel UK buyers
The announcement follows a second meeting between Business Secretary Sajid Javid and Tata Global Chairman Cyrus Mistry this week in Mumbai where progress on the sales process was discussed.
The UK government has been clear that since Tata announced its intention to divest its UK operations, it is ready to support a credible private buyer of Tata Steel UK, offering financing on commercial terms to support the ongoing operations and deliver long-term investment in the future of the business.
The financial support package will be tailored to the purchaser’s strategy and financing needs. However, it is expected that all, or the large majority, will be through the provision of debt financing. Other options include:
- providing hybrid (convertible debt) or alternative forms of financing
- supporting a purchaser’s financing by taking a minority equity stake (up to 25%) acting in support of the purchaser; however, government will not acquire a material element of control over the business
The UK government is actively working with Tata Steel and the British Steel Pension Scheme’s Trustees to find a solution that will help minimise its impact on a potential purchaser, and potentially separate it from the business.
Business Secretary Sajid Javid said:
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.
Ministers have visited Tata Steel sites across the country and the pride and dedication of the highly-skilled men and women working there is obvious to see. We have already delivered on energy compensation, on tackling unfair trading practices and on procurement of British steel, and we will keep on going further to support this vital industry.
First Minister of Wales Carwyn Jones said:
We’re committed to supporting any credible bid to secure steel making in Wales. We have worked with the UK government to put in place this significant package of support and we believe that this will help secure a successful sale of Tata Steel’s operations in Wales and the rest of the UK.
Today’s announcement, made in partnership with the Welsh government, follows the start of a formal sales process announced by Tata Steel last week. In addition to the support package, the UK and Welsh governments will also be willing to consider additional grant funding support, for example to support the development of power plant infrastructure, energy efficiency and/or environmental protection measures, R&D and training.
The European Investment Bank has also stated that it recognises the diverse challenges facing European steel companies and stands ready to consider possible financing for new investment in the UK steel industry on the basis of specific proposals.
The UK government has already taken action to support the steel industry which is currently dealing with unparalleled global economic conditions. Specifically, the UK government has:
- provided nearly £200 million in compensation to energy intensive industries to mitigate against the impact of climate change policy, including over £50 million in compensation to Tata Steel
- secured flexibility over EU emissions regulations
- provided guidance to ensure British steel makers have the best chance of competing for, and winning, contracts for all public procurement projects
- tackled unfair trading practices at an EU and an international level by going further than previous governments in voting in favour of tariffs on steel dumping