UK govt could take 25% equity in Tata Steel UK: reports

The UK government could take up to 25 per cent equity in Tata Steel UK to support a buyer as its Indian owners, incapacitated by a rising costs and a tide of cheap imports of steel from China, decide to exit its UK operations.

The British government announced this as part of a package of financing a potential buyer for Tata Steel UK, but said much would depend on the purchaser.

Tata Steel last month announced plans to exit its entire UK operation amidst rising cost of operations and falling sales on the back of zooming imports of Chinese steel (See: Tata Steel puts entire UK business up for sale).

The UK government is now battling to save a once mighty industry and thousands of jobs that the industry generated – both directly and indirectly.

The government, however, said whatever support it offered would be on commercial terms, adding that it would most likely be debt financing, although taking an equity stake would also be an option.

"If we were to take an equity stake it would be a minority one with the aim of supporting the purchaser in delivering long term future for the business. We are certainly not seeking to be controlling the company," a spokeswoman for Prime Minister David Cameron said.

Britain's business ministry said the government could take a stake of up to 25 per cent in the assets.

The government also said it was working with the pension scheme trustees of Tata Steel and British Steel to minimise any pension impact on the purchaser.

"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," the ministry said.

The government said it is also working to ''find a solution'' to the burden of pension liabilities, which has been putting off potential buyers.

Senior officials at Tata's Port Talbot site in Wales, Britain's biggest steel works, said earlier this week they were seeking to launch a management buyout plan with the support of staff, investors and the government to save the loss-making plant.

The details of the package emerged after a second meeting between the UK's business secretary Sajid Javid and Tata Global chairman Cyrus Mistry in Mumbai.

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.''

Carwyn Jones, the first minister of Wales, 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.''

The European Investment Bank has also said it may consider possible financing for new investment in the UK steel industry on the basis of specific proposals.