Sheffield Forgemasters gets up to £36m from government

Nick Clegg said he was 'acutely aware' of the controversy last year when a loan was cancelled

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Sheffield Forgemasters has been offered a £36m government loan as part of its nationwide Regional Growth Fund.

Deputy Prime Minister and Sheffield Hallam MP Nick Clegg said it would support apprenticeships and equipment.

The coalition had cancelled an £80m loan to Forgemasters to build parts for nuclear power stations as part of a review of Labour's spending decisions.

Forgemasters said the newer, smaller loan would be used to prepare for future contracts.

With just over three months to go before the 2010 general election Labour's Industry Secretary Peter Mandelson announced that Sheffield Forgemasters was to be granted an £80m loan.

The taxpayers' cash would be used to upgrade equipment including a new 15,000-tonne forging press to manufacture ultra-large components for the growing nuclear power generation industry.

As part of its policy of reducing the budget deficit the incoming coalition government reviewed all Labour's promises of funding in the run-up to the election.

It resulted in the cancellation of 12 projects totalling £2bn, including the loan to Forgemasters.

At the time the Deputy Prime Minister Nick Clegg, a Sheffield MP himself, said Labour had let local people down by promising money it did not have.

Fellow coalition cabinet member Chris Huhne claimed the loan was not necessary because the company was successful enough to raise a commercial loan.

Commenting on Monday's announcement of the loan Nick Clegg denied it was a policy U-turn.

He said Forgemasters itself made a successful fresh bid to the government's Regional Growth Fund.

As the market for new nuclear power stations has declined since the earthquake in Japan the company no longer needs the giant forging press so it requested a smaller loan.

Graham Honeyman, chief executive of Sheffield Forgemasters, said: "We're putting in other plant and equipment to make sure that we're ready for the future of nuclear and other industries as well.

"We will have access to up to £36m. That will be spent on areas like the melt shop, the forge and the machine shops. Over a period of 18 months we will be able to put new plant and equipment in.

"This loan will be used for plant and equipment enhancements for the forge and machine shops to expand the business. It will also provide additional training and further refinement of our manufacturing processes and firmly underpins the country's place at the leading edge of engineering technology."

Mr Clegg was asked repeatedly whether the new loan was a U-turn as he toured the site following the announcement.

He said the Government had always said it was willing to support Forgemasters, but the £80m loan agreed by the previous Labour administration was judged unaffordable.

He said: "Last year we came into Government and the outgoing Labour government wrote a little note - the Chief Secretary to the Treasury - saying there is no money."

Labour leader Ed Miliband said the funding announcement was "too little, too late".

He said: "Any money that helps struggling businesses is important but at the same time as the government is coming along and providing money in the Regional Growth Fund, it is cutting back on the investment allowances - the money that helps companies to invest in plant and machinery."

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