Tata Steel’s hopes of securing close to £500 million of funding from the UK Government have suffered a major setback following reports that bailout talks recently broke off, sparking fears over the future of thousands of jobs at the Port Talbot steelworks.
According to the Financial Times, citing unnamed sources, talks between the U.K.’s Treasury and the company were halted after the government concluded the Indian multinational was sufficiently financed and didn’t qualify for taxpayer support.
Tata remain in talks with the government on other areas of potential support like tax breaks, which could extend to state loans, the FT said.
The Treasury told the newspaper it did not comment on individual firms.
Tata, the largest steel manufacturer in the UK, had been in negotiations to secure support from the government’s Project Birch scheme, a programme that was launched by the government to help “strategically important” companies that have taken a severe financial hit due to the Covid-19 pandemic.
Project Birch funding comes with the stipulation that it helps achieve Westminster’s target of net-zero carbon emissions by 2050 and that jobs are not lost.
Last month The Times reported Tata Steel had submitted plans during the negotiations to shut two blast furnaces in Port Talbot and replace them with electric arc furnaces, potentially triggering mass job losses. The company described the report as “unsubstantiated speculation”.
Sky News also reported Tata Steel had submitted a proposal to hand over 50% of the company in return for £900 million of government support.
Close to 4,000 people are employed at the Port Talbot plant, which is the largest steelworks in the UK.
Analysist are predicting Tata faces a decline in revenue of up to 35 % in the last quarter due to falling demand for steel due to the coronavirus pandemic.
The business is seeking to implement a world-wide cost-cutting target of £2.5 billion and cut thousands of jobs.