Britain says government contracts must consider local steel firms

LONDON (Reuters) - Britain said on Sunday that UK steel producers must be considered for infrastructure and other government contracts involving steel supplies, as part of plans to find a long-term solution to a crisis in the industry.

The government is looking for ways to support domestic steel producers after India's Tata Steel put its loss-making British plant up for sale on Wednesday, putting thousands of jobs at risk.

Prime Minister David Cameron has said there was no guarantee of a buyer for Britain's biggest steel producer, which has been hit by high costs and Chinese competition, and a state takeover was not the answer.

Under its support measures, the government will create an approved supplier list for steel companies wanting to bid for public sector projects, such as Britain's 55 million-pound ($78.25 million) high-speed rail link, which will need two million tonnes of steel.

"By changing the procurement rules on these major infrastructure projects we are backing the future of UK steel - opening up significant opportunities for UK suppliers and allowing them to compete more effectively with international companies," Business Secretary Sajid Javid said in a statement.

The introduction of measures to ensure British steelmakers are considered for government contracts could take six to nine months, a spokeswoman for Javid's department said.

The government has faced criticism over its response to Tata's decision to sell its UK plant in south Wales, which employs 15,000, with opposition politicians saying it was "asleep at the wheel."

The government has said it is working to broker a deal with potential buyers after Tata's decision to pull out of its almost decade-long venture in Britain.

Investment firm Greybull Capital is interested in buying Tata's Scunthorpe steelworks and could announce a deal as early as Wednesday, a source familiar with the deal told Reuters.

The deal is expected to be for 400 million pounds, with about half of the investment coming from Greybull and the other half from a consortium and maybe a government loan of up to 100 million pounds, the source told Reuters.

A Greybull spokesman said talks were continuing constructively.

British newspaper the Telegraph first reported on Sunday that the Meyohas brothers are set to buy the Scunthorpe plant from Tata. [http://bit.ly/1qhju51]

Liberty House Group, which produces steel in Britain, has begun talks with the government over a potential partnership but does not want to buy all of Tata's UK operations, its executive Chairman Sanjeev Gupta was quoted as saying by the Sunday Telegraph.

Javid told the BBC he would not talk about specific offers but said he wanted to find a buyer for the whole business and the government would engage with any willing and serious buyer.

He said the government was looking at how it could help with issues such as Tata's pension burden and costly energy supplies.

"These are the kind of things we have already thought of, we have already started working on and what I hope is that you will have the offer document from Tata, overlay on top of that the help the British government can provide and then you have the makings of a successful deal," he said.

Cheap Chinese imports have hit Britain's steel industry. Britain imported 826,000 tonnes of Chinese steel in 2015, up from 361,000 two years earlier, according to the International Steel Statistic bureau.

Cameron has said he wants Britain and China to work together to tackle overcapacity in steel. Last week, however, China imposed anti-dumping duties of up to 46 percent on specialist steel products from Japan, South Korea and the European Union.

($1 = 0.7028 pounds)

(Reporting by Li-mei Hoang and Kylie MacLellan; Vishal Sridhar in Bengaluru and Freya Berry in London, Editing by Susan Fenton and Alan Crosby)