UK agrees £500mn deal to secure Port Talbot steelworks

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Britain will pay subsidies of up to £500mn to Tata Group to secure the future of the country’s biggest steelworks at Port Talbot in Wales in a deal that could result in as many as 3,000 job losses. 

As part of the agreement unveiled on Friday, Tata Steel will inject about £750mn into Port Talbot to enable it to switch to greener forms of steelmaking using electricity rather than coal. 

The government said the support package was one the largest in UK history and would help safeguard about 5,000 jobs. Tata employs around 8,000 people in the UK, with 4,000 at Port Talbot. 

The site, which is home to two of Britain’s remaining four blast furnaces and is the country’s largest single carbon emitter, is expected to bear the brunt of the job losses as electric arc furnaces are less labour intensive.

The closure of the two blast furnaces will entail shutting some of the associated assets, including the plant’s coke ovens. Tata instead will build one electric arc furnace as part of a total investment of £1.25bn, which includes the £500mn from the government. 

Britain’s steel industry, which had more than 300,000 workers in its heyday in the 1970s, now employs an estimated 39,800 people according to trade body UK Steel.

The industry faces acute competition from imports. It is also the UK’s biggest industrial emitter of carbon dioxide. The government said replacing the blast furnaces would reduce the UK’s entire carbon emissions by about 1.5 per cent. The company on Friday warned of “potential deep restructuring” for the carbon-intensive assets at the site.

The agreement with Tata draws a line under more than a year of talks between the two sides and comes just weeks after the government agreed a separate £500mn aid package to Tata to support a £4bn battery factory in the UK. 

The company, which has struggled to make a profit from its steel operations in the UK, warned last year that its operations would be under threat of closure without government support.

Tata Group chair, Natarajan Chandrasekaran, said the proposed investment would “preserve significant employment and presents a great opportunity for the development of a green technology-based industrial ecosystem in South Wales”.

Chancellor Jeremy Hunt said it was “right that we are ready to step in to protect this world-class manufacturing industry and to support a green growth hub in South Wales”. 

The company said it would consult with workers on the proposal. Koushik Chatterjee, Tata Steel chief financial officer, told analysts the consultation should last about three months.

Union leaders warned they would fight any proposed job losses “tooth and nail”. 

Sharon Graham, general secretary of Unite, said the plans were “disgraceful, short-sighted and lack ambition”. “Unite will be fighting tooth and nail not only to save these jobs but to create more jobs in steel.”

Arc furnaces produce steel by melting down scrap, which the UK currently exports. However, the quality of steel produced is not suitable for some applications, such as automotive.

Leaders from Community, a union representing steelworkers, said they had been given assurances by the company that they would consult with workers on which decarbonisation approach to take.

Unions want Tata to consider other options in addition to arc furnaces, including replacing coal with green hydrogen — although this is not yet commercially available in the UK.

“Putting all our eggs in the electric arc basket will come at the cost of thousands of jobs, our economic security, and the independence of our industry,” said Alasdair McDiarmid, assistant general secretary of Community.

Labour, which has pledged £3bn for investment to decarbonise steel, blasted the agreement. 

Jonathan Reynolds MP, Labour’s shadow business and trade secretary, said: “Only the Tories could spend £500mn of taxpayers’ money to make thousands of British workers redundant.

“Britain needs an industrial strategy that invests alongside industry delivering a return on taxpayers’ investment whilst protecting our national capabilities and workforce.”