LONDON, Oct 1 (Reuters) - The British government is staying in touch with "relevant parties" in the Lloyds TSB (LLOY.L: Quote, Profile, Research) takeover of mortgage lender HBOS HBOS.L, the spokesman for Prime Minister Gordon Brown said on Wednesday.

"Of course the government is staying in touch with the relevant parties," the spokesman said.

Shares in HBOS fell as much as 20 percent on Tuesday amid market talk Lloyds could reduce its offer by a quarter. But the shares were trading about 8 percent higher at 1030 GMT on Wednesday. (Reporting by Frank Prenesti; Editing by Adrian Croft)