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Cable clarifies Forgemasters decision

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Business secretary Vince Cable has been forced to clarify reasons given by David Cameron and Nick Clegg for axing an £80m loan to Sheffield Forgemasters.

The funding had been agreed by Labour to help the firm expand its business in the nuclear industry, but soon after taking office, the coalition government cancelled the loan on the grounds of affordability.

The Prime Minister and his deputy came under fire from MPs for accusing the company’s directors of being unwilling to dilute their shares.

Mr Cameron told MPs to look at Forgemasters’ shareholder structure and “see who was really going to benefit from that not very thought-through piece of financial engineering”.

And Mr Clegg said the firm only sought public funding because “they did not want to dilute their own shareholdings in the company”.

In a written ministerial statement, Liberal Democrat Mr Cable said: “Although the question of equity dilution had no bearing on the decision not to proceed with the loan to Forgemasters, comments made by the Prime Minister and the Deputy Prime Minister have been queried and I therefore wish to explain the position.”

Mr Cable pointed to comments made by Forgemasters chief executive Graham Honeyman in an interview with the Yorkshire Post in June.

Mr Honeyman told the newspaper he wanted support from the government because “private equity would take the whole of the shareholding away from Forgemasters and put it in the hands of somebody else”.

He added: “That’s not just my shares (49%) or the other directors - 65% of the shop floor own the shares in the company.”

Mr Cable told MPs: “It is this dilution that the Prime Minister and the Deputy Prime Minister were referring to when they spoke to the House.

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