Tata Steel to receive a £500mn subsidy from UK government

The UK government will announce a subsidy of more than £500mn to ensure the future of Britain’s largest steelworks in Port Talbot, Wales. However, this won’t prevent the loss of approximately 3,000 jobs.

Two people familiar with the negotiations expect that the long-awaited agreement between India’s Tata Group will be announced this Friday. According to the agreement, the Indian company is expected to invest approximately £700mn in the operations. This will help the company move towards greener forms for steelmaking.

Two people have said that the deal was intended to ensure the survival of this sprawling plant, but it could lead to as many as 3,00 jobs being lost. Port Talbot would bear the brunt of these losses, as its two blast furnaces will be shut down over time.

Port Talbot is home to half of Tata Steel’s 8,00-strong workforce. According to a government official, all these jobs would have been at risk without the deal backed by the state.

Tata warned last year that the UK operations of its company were in danger unless they received government funding for them to move to electric arc furnaces with less carbon. The company’s initial request for state funding was much higher.

The alternative to any agreement is the loss of 8,000 jobs. The official stated that this is yet another example of how the Prime Minister has resolved a long-standing issue. The original requests from Tata were in the billions of dollars, so this would be a major win for the UK government when it comes to value for money,” said they. The government declined comment

The main steelworkers union, however, said that it would not accept any job cuts and had refused to agree to the closure.

Alun Davies, the national officer of the Community union, stated that the union “did not support the switch to an electric-arc furnace model”. He called for a “full and meaningful consultation” on “all the options available to decarbonise the steelmaking process and ensure the future of all UK plants”. He stated that the union will do “everything in its power to support and protect our members’ jobs”.

Tata Steel stated that it was in talks with the UK Government over a “framework to ensure continuity and decarbonisation in steel production in the UK”. Due to the “financially restricted position of our UK businesses, any significant changes are only possible with Government investment and support”, added Tata Steel.

It has pledged £500mn to Tata Motors (another subsidiary of India’s Tata Group) just two months ago to support the new £4bn Somerset battery factory.

Jonathan Reynolds, Labour’s shadow business minister, said that the government “scrambled” to make a “last minute deal” with Tata Steel, which would still result in huge job losses.

He said that only this government would spend £500mn on laying off thousands of workers and provide no protections for the nation’s investments. “This is a short-term plan that will not be sustainable for our steel industry.”

Separately, ministers and British Steel, another major producer in this sector in the UK, have been in separate negotiations over grants of hundreds of millions pounds for new electric-arc furnaces in Northern England. Announcing is expected to take place in the next few weeks.

UK Steel, a trade association, estimates that the UK steel industry now has 39,800 workers. In the 1970s it employed over 300,000. Imports are a major threat to the industry, as is decarbonisation.

Gareth Stace said that the government’s support will help the industry to “deliver huge opportunities” as it seeks to drastically reduce its carbon emissions.