Lakshmi Mittal, the steel tycoon worth an estimated £14.8 billion, is expected to spend more than £50m over the next five years rebuilding Long Beach in Mississippi.

He will provide the labour, capital and expertise to restore the town, home to 17,000 people, which was wrecked by the hurricane in August.

Insurers are refusing to pay out for flood-damaged homes while government aid is expected to be spent on restoring New Orleans and other large cities ahead of smaller towns.

Mittal, 55, said this weekend the effects of Katrina were “heartbreaking” and he had been moved to get involved.

“It will take years to rebuild the affected communities,” he said. “These communities are left with challenges that require innovative, long-term solutions and substantial commitments of both time and resources. Few cities were more devastated than Long Beach.”

Mittal’s donation will propel him into the ranks of Britain’s most philanthropic citizens. He is also understood to have given large amounts to areas hit by the tsunami and is likely to give money to victims of last weekend’s earthquake in Pakistan.

About half the homes in Long Beach were destroyed by the hurricane and the town had to be largely abandoned after the sewage system was destroyed. Most residents have been moved to temporary accommodation in Florida or trailers on the town’s outskirts, paid for by the federal government.

Last week Mittal moved a team of engineers, logistics specialists and other experts to assess the size and scope of the project. The billionaire will send teams of builders to begin the work later this month.

“We will be covering materials and people to do the job, which makes the costs very hard to calculate,” said a spokesman for Mittal’s company. “Elsewhere, other companies have given a cheque and left — that’s something we won’t do. We will see this project through. Mr Mittal was very affected by what he saw. He said: ‘We have the people, the materials, let’s do it’.”

The tycoon has no previous links to Long Beach, although his company, Mittal Steel, has a plant in Jackson, Mississippi. His representatives are understood to have toured the coastline in the area looking for a suitable town after Mittal decided to help the hurricane victims. They were impressed by the mayor of Long Beach.

Billy Skellie, the mayor, said rebuilding the infrastructure and public buildings would cost almost £16m. Sources close to Mittal said this would be a “fraction” of the total cost.

“It’s going to take three years before we have a half-normal life over here,” said Skellie. “Our community is devastated, but the people here are very resilient. It was a huge relief when Mittal stepped in.”

Residents also expressed relief that Mittal, who bought a £70m mansion in London last year, had chosen the town. Richard Notter, 47, a defence contractor, said: “Everything within 1,000ft of the beach has gone. The city is bankrupt, we’ve lost 60% of our business, 45% of our homes. It’s going to be a long-term rebuild.”

Mimi McGrath, a local government worker, said: “My house has gone, Long Beach is devastated. What Mittal has done is wonderful, a godsend.”

The issue of who pays for the aftermath of Hurricane Katrina is becoming increasingly contentious. Insurers are refusing to pay for flood damage and developers expect thousands of homes to be repossessed. Politicians in the affected areas are appealing for more than $100 billion in federal aid.

Mittal’s donation would put him among the top 10 givers in Britain, based on the Sunday Times giving index. The Weston family was the biggest net donor in 2004, with £68.6m.

Mittal became the wealthiest person in Britain after creating the world’s biggest steel firm last year. With his business ambitions now largely fulfilled, friends say he is eager to achieve a global legacy. The Long Beach donation is expected to be the first in a series of high-profile charity acts and he is tipped to take a seat in the House of Lords next year.

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