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UK crisis talks over Tata Steel sale

U.K. Prime Minister David Cameron will chair a meeting of ministers on Thursday morning as he weighs how to avoid the closure of an iconic steel plant in South Wales without making costly financial promises.

Cameron called the meeting and Business Secretary Sajid Javid cut short a trip to Australia to address the crisis sparked by Tata Steel Ltd.’s decision late Tuesday to sell its plant in Port Talbot, where it employs 6,500 people.

The crisis comes at a politically sensitive time for the prime minister, with Welsh Assembly elections only a month away and less than three months before a referendum on European Union membership that’s split his ruling Conservative Party. The government has repeatedly said it’s considering all options for the facility’s future, though it’s ruled out bringing it into state ownership.

 “The timing is very awkward, as the context of the referendum makes this more sensitive, so the government will buy time if it can,” Wyn Grant, a professor of politics at Warwick University, said in an interview. “But Cameron is a pragmatic Conservative. If he thinks it’s a political imperative, then he will be prepared to do something.”

Tata Steel, part of India’s biggest conglomerate, said a slump in global prices has forced it to consider selling its U.K. business after concluding that a restructuring of its strip-products unit, centered on Port Talbot, is unaffordable. Cameron, campaigning to keep Britain in the EU on June 23, is keen to limit job losses and avert the possible demise of Britain’s steel industry amid accusations that membership of the bloc is to blame.

Vote Leave and Leave.EU, the two main groups campaigning for exit from the EU, both put out statements saying that the bloc’s control of trade policy has left Britain unable to protect its steel industry.

The Port Talbot steelworks is perhaps the most visible remnant of the mining and industry that once dominated a region that’s been in economic decline for decades. The plant was once controlled by state-owned British Steel and was part of a package of assets bought by Tata for $12 billion a decade ago. Tata had already announced 1,200 redundancies in Scunthorpe and Lanarkshire and more than 700 in Port Talbot, according to the GMB labor union, which said the government should consider taking over the assets at risk.

 “I don’t think that nationalization is going to be the solution,” Javid told the BBC on Wednesday. “There are buyers out there. It might require some sort of government support and we are ready to look at all options.”

Tata Steel has been in “close talks with government prior to this announcement and will continue to keep close links with the U.K. and Welsh governments going forward,” said spokesman Damien Brook. He declined to comment on meetings with ministers.

Whatever the government is prepared to spend, EU regulations on state aid mean injections of cash to save failing industries cannot be bigger than those a private investor would make.

Cameron rejected demands by opposition Labour Party leader Jeremy Corbyn to recall Parliament from its Easter recess to discuss the threat to the plant.

Kate Hoey, a Labour lawmaker who backs a British withdrawal from the EU, blamed British membership of the bloc for the crisis. “Dogmatic, ineffective rules” governing energy production forced up costs, she said in an e-mailed statement, accusing the bloc of having “sat on its hands and allowed China to dump cheap steel.”

The steel industry is under pressure across Europe as mills struggle to compete with a flood of cheap exports from China, accounting for about half of global output and eroding profits worldwide. Tata closed plants and cut jobs in the U.K. last year as China’s exports surged to an all-time high, while local producers contended with sinking domestic prices and a glut of material.

Scotland’s semi-autonomous government announced a deal last week to buy two mothballed Tata Steel plants and to sell them on to Liberty House Group on the same terms.

“The outlook for the U.K. steel industry is clearly bleak,” said Alessandro Abate, a London-based analyst at Berenberg Bank. Tata “explained the turnaround is basically unaffordable and is net dilutive for them. There’s a chance they may point to a shutdown, they may want to force the hand of the government. They’ve taken a position like this and either way they probably don’t plan to stay any longer.”-Bloomberg