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Last Updated : Sep 08, 2020 04:46 PM IST | Source: Moneycontrol.com

UK government appoints Credit Suisse to chart out Tata Steel rescue plan

Talks with Tata Steel have been ongoing for months and in July the company had put forth a proposal aimed at securing nearly 900 million pounds from the government for its UK operations

N Chandrasekaran
N Chandrasekaran

The British government has brought in investment bankers to salvage Tata Steel’s UK business to preserve thousands of jobs, after parent company Tata Steel said it would be unable to fund the European unit’s losses.

The country’s biggest steelmaker employs 8,000 people in the UK, including 3,500 at Port Talbot in south Wales.

The British Treasury has appointed Credit Suisse to advise on talks with Tata Steel, Sky News reported, also quoting sources say that McKinsey has been drafted to “draw up a blueprint for the future of the UK's wider steel industry.”

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Moneycontrol could not independently verify the report.

The move comes amid speculation that negotiations between the Indian company and the government had ended. Steel sector sources told the channel Tata Steel was “on the verge of presenting a revised proposal” involving substantial funding from the UK government.

Talks with Tata Steel have been ongoing for months and in July the company had put forth a proposal aimed at securing nearly 900 million pounds from the government for its UK operations. The investment would have semi-nationalised the steelmaker, giving taxpayers 50 percent stake.

Talks, however, fell through after officials disagreed on Tata Steel writing off an equivalent debt owed by its UK business, and not committing capital of its own, the report added.

The Treasury did not respond to queries, the report said.

Tata Steel told the channel they are in “active discussions with the UK government on several options for the future of our UK operations”, including “sustainable decarbonised footprint for the future.”

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In a recent AGM, N Chandrasekaran said talks with the UK government are on and “we will do what is good for the company.”

"Given prevailing market conditions and disruption caused by the COVID-19 pandemic, it is clear that our UK operations face structural challenges that need to be urgently addressed. Discussions with the government are constructive and ongoing, and at this stage, no decisions have been made,” the company said.

Since the COVID-19 pandemic, several steelworkers have been put on paid leaves with companies seeking government aid. Thus, McKinsey’s involvement in charting out a plan for Britain’s broader steel future is being viewed as significant, industry sources said.

A government spokesperson told the channel that they remain “very supportive of the UK steel sector and its valuable contribution to the UK economy” and regularly uses external advise to “better understand how to support businesses."

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First Published on Sep 8, 2020 04:19 pm
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