British Steel Industry Prepares for 2,500 Job Cuts at Port Talbot as Government Deal

The British steel industry has been warned that 2,500 jobs will be lost at the Port Talbot Steelworks. Thousands more are at risk across the UK as the government prepares to offer taxpayer-funded deals for the south Wales facility.

Jonathan Reynolds is expected to announce on Wednesday the details of the rescue deal that will see the government give Tata Steel £500m for the construction of a new electric heater. However, this comes at the expense of massive redundancies due to the closure of the last remaining blast-furnace.

Natarajan Chandrasekaran said on Tuesday that the talks “were going well” and they were “very close” in reaching an agreement.

The government has failed to deliver on its promise to “push job guarantees” and 2,500 jobs are expected to be lost in the next few months.

Around 2,500 jobs are also threatened at British Steel’s Scunthorpe plant in north Lincolnshire, as the Chinese owner of the plant could close the blast furnaces before the end the year.

Tata is planning to replace polluting blast-furnaces with a much more environmentally friendly, but less labor-intensive electric arc technology. Unions and politicians have warned of severe economic damage if the UK’s blast furnaces in Port Talbot, Scunthorpe and other locations are closed.

Tata, the company that also owns Jaguar Land Rover, Tetley Tea and Tetley Tea, have long complained about Port Talbot’s steel production being unsustainable and losing money. Labour promised to renegotiate a £500m subsidy agreement with Tata that was signed by the Conservative government in September.

The Indian company announced in January that it was unable to afford to continue producing at the works, which they said were losing £1m per day. They vowed to shut down both their blast furnaces before the end of this year.

The Port Talbot blast-furnace was shut down in July. Production of the second furnace will cease on 28 September. The loss of raw steel production will threaten 2,500 jobs, since electric arc furnaces are much more efficient.

The Conservative Government’s deal proposed that Tata invest £750m in exchange for £500m of funding to build a new electric-arc furnace.

Reynolds was the shadow business minister in the opposition. He criticized the government’s decision to provide Tata funds without job guarantees. Reynolds claimed that a “better offer” was available after Labour’s victory in the election and that he will press for “job guarantee” as a return for taxpayer-funded investments.

Now it is understood that Labor will continue to provide the £500m funding, but without the job guarantees promised. Labour will commit to working with Tata in future investments for the steelmaking industry throughout the country as part of this deal.

The Labour Party has committed to provide an additional £2.5bn for “rebuilding the country’s Steel Industry”. Unions received assurances from Reynolds that they would work closely together with Tata in order to explore future investment opportunities.

Tata has signed a Memorandum of Understanding (MoU), with the unions, committing future investments to UK steel plants. This includes Port Talbot as well as its Llanwern plant near Newport.

Sources said that the intervention of the Labour government helped to lock in investment commitments by Tata, which unions had pushed for inclusion in the MoU.

The situation for our members remains difficult, despite the improvement.

The MoU will be voted on by union members, and it would result in improved redundancy benefits for those who lose their jobs as well as more favorable training conditions. The employees would get 2.8 weeks of salary for each year of service up to 25 years with a guarantee payment of £15,000. Those on Tata’s Training Scheme could receive as much as £27,000 per year.

Charlotte Brumpton Childs, GMB’s national officer, was pleased with the improvements and also by the promise of future funding.

She said that “certainty for Port Talbot’s future operations and GMB’s position on no mandatory redundancies is much appreciated.”

Tata has received over 2,000 expressions from employees regarding voluntary redundancy.

The Chinese owner of British Steel is accelerating plans to close the remaining blast furnaces on its Scunthorpe site.

BBC reported that the unions hoped that Jingye would keep its blast furnaces running for three more years after it bought British Steel. This would allow a new electric iron to be built.

The Guardian reports that British Steel and the government are still in negotiations, and an announcement is expected next week.

In July, the GMB warned that Jingye could lose 2,500 jobs before Christmas. British Steel insists no decisions have yet been made.

British Steel’s spokesperson said: “We have ongoing discussions with government regarding our decarbonisation plan and future operations of our UK businesses.”

A spokesperson for the Department for Business and Trade said that steel is essential for a secure, vibrant economy. A government that works in partnership with business and trade unions to ensure a green transition for steel is needed by our steel sector. This will benefit the workforce as well as deliver economic growth.

“Decarbonisation is not deindustrialisation. We will work to protect jobs in these negotiations to secure the future of steelmaking for future generations.”