Cable seeks clarity over 'unaffordable' loan

After weeks of pressure from Labour opponents, Mr Cable issued a statement to MPs yesterday seeking to clarify reasons given by David Cameron and Nick Clegg for axing the deal that which had been agreed shortly before the general election to help the firm expand its business in the nuclear industry.

As he sought to draw a line under the issue, Deputy Prime Minister Mr Clegg raised hopes among those fighting the Government's decision by appearing to leave the door open for future support for the company as he stressed the loan was pulled because it was unaffordable "in this year's current budget".

MPs left Westminster for their summer recess yesterday after several weeks of intense battle over the Forgemasters loan. The already-bitter battle exploded into life last week when it emerged Tory donor and Sheffield industrialist Andrew Cook had lobbied ministers, trying to get the deal axed.

The Prime Minister and his Deputy had been under fire from Labour MPs for accusing the company's directors of being unwilling to dilute their shares.

In his statement, Liberal Democrat Mr Cable insisted the equity issue had "no bearing" on the decision which was purely because the loan was unaffordable, but said he wanted to offer an explanation because comments by Mr Cameron and Mr Clegg "have been queried".

He pointed to comments made by Forgemasters chief executive Graham Honeyman – who had warned that obtaining private investment would effectively mean someone else taking control of the company – to explain why Mr Cameron and Mr Clegg had raised the issue.

Mr Clegg, who has come under intense personal pressure from Labour because of his position as Sheffield Hallam MP, later reiterated the Government's pledge that it "stands ready to work closely with the company as it pursues its ambitions and willing to look carefully at all proposals, as we would for any project".

He said the issue was "the lack of affordability in this year's current budget".

Shadow Business Secretary Pat McFadden said: "The Government's statement on Sheffield Forgemasters is an admission they have got it wrong."

Sheffield South East MP Clive Betts said he would continue pressing to get the loan restored.