With official concern that nationalisation of TATA Steel could potentially expose the exchequer to considerable liabilities, a new form of public sector intervention may be required if a buyer for TATA Steel’s British operations is not forthcoming.

This should not necessarily ignore the experience of successful nationalisation-and-subsequent privatisation programmes, such as Rolls Royce, but could build on international experience, although this would probably require a rapid legislative initiative.

In the United States, and indeed elsewhere, ‘conservatorship’ programmes have been used to rehabilitate enterprises deemed troubled but economically strategically important. In the United States this process has been widely used via Chapter 11 to return a range of corporations, such as car companies and airlines, back to a commercially viable status, following difficulties during a period turbulent or unusual market conditions.

The essential distinction between outright nationalisation and ‘conservatorship’, would appear to be that whilst the authorities (or regulators) take over financial responsibility for the debt and day-to-day operations of the beleaguered enterprises, the company structure is effectively retained, although with contemporaneous board-level changes and business strategy reviews.

The government recoups this support as and when the company returns back to profitability and control is either returned to the previous owners or profitably sold to a new owner. A similar process can be seen to have adopted in the support given to both RBS and Lloyds, with authorities aiming to recoup costs through the sale of their shares.

This approach could be used to facilitate a sale or even a management buy-out, that might be achieved in combination with the UK and Welsh governments working together in support – whether by taking a stake, guaranteeing future loans or perhaps providing incentives for others to invest (eg by the government taking over the pension fund).

Such an approach might see a combination of Government, Energy Suppliers, Management and Tata itself coming together as partners in the ownership of might be ‘new’ British Steel. There are examples from Europe of such an approach – for example Belgium.

In the US process, the US Treasury defines conservatorship as the legal process in which a person (or entity) is appointed to establish control and oversight of a corporate entity to put it in a sound and solvent condition. In a conservatorship, the powers of the corporate’s directors, officers, and shareholders are transferred to the designated Conservator.

The role and appointment of the Conservator in the US is defined within the parameters of an existing legal and regulatory environment, with the benefit of past historic experience. If this approach were to be pursued in the UK the need to establish such parameters within enabling legislation would have to be considered.

According to the US Treasury, the rationale for appointing the Conservator is to preserve and conserve corporate assets and property and return the corporate to solvency and ultimately profitability.

Establishing a corporate conservatorship is seen a part of the authorities’ efforts to restore confidence in a corporate or sector, bolster its capacity to realise its aspirations but also mitigate any perceived systemic risk that has contributed directly unusual or adverse market conditions.

The day-to-day operations remain unaffected, and the business is supported to continue with interruption. The period of conservatorship is largely down to the appraisal of the Conservator.

In the US, a Conservator is appointed, by an “Order Appointing a Conservator”, they immediately succeed to the rights, titles, powers, and privileges of the corporate, and any stockholder, officer, or director of such the corporate with respect to the corporate and its assets, and take title to all books, records and assets of the corporate held by any other custodian or third-party. The Conservator is then charged with the duty to operate the corporate entity.

With the business operating as usual, and indeed any stock continuing to trade in the market (although with the proviso that shareholder rights remain suspended during the period of the conservatorship), the US Treasury provides support through special credit facilities and stock purchase agreements.

In the UK, similar such support could be provided by an officially guaranteed credit facility (administered perhaps by RBS or Lloyds) or a zero-interest bond issued and underwritten by a UK-government agency, such as UK Financial Investments or indeed by enabling the BoE to purchase such corporate paper.

The overriding aim of conservatorship should be to enable the government to achieve a period of calm in the market, during which an effective restructuring of the steel sector, which over medium-term is commercially viable and over the longer-term is economically essential.

Indeed, for any steel sector conservatorship to be successful, however, the government would also need to make progress on a range of policy areas or '5 Asks' that we have highlighted at the Midlands Steel Task Group in recent months: energy costs; emissions policy; business rates; procurement; and temporary trade defence. There is no single solution to the crisis facing the steel industry; a holistic response is required to tackle such issues. More on these in future blogs.

* David Bailey works at the Aston Business School and Paul Forrest at Birmingham City University