The UK government has agreed a £500m support package for Tata Steel to secure the future of the Port Talbot steelworks, in a deal unions said will have “devastating consequences”, with as many as 3,000 workers expected to lose their jobs.
India’s Tata group, which owns the vast steelworks in south Wales – Britain’s biggest – is also expected to inject about £725m to help it transition to greener production methods.
The country’s largest steel producer, which employs about 8,000 staff in the UK, with about half based at Port Talbot, had warned that it faced site closures if a financial support package could not be agreed.
“The agreement with the UK government is a defining moment for the future of the steel industry,” said Natarajan Chandrasekaran, the chair of Tata Group.
“The proposed investment will preserve significant employment and represents a great opportunity for the development of a green technology-based industrial ecosystem in south Wales.”
Under the agreement, the government will provide a state aid package worth up to £500m to help switch Port Talbot’s two coal-powered blast furnaces to greener electric arc versions that can run on zero-carbon electricity.
Tata, which made a pre-tax loss of £279m in the UK, according to the company’s most recent annual results, is expected to cut about 3,000 jobs over the long term as a result of decarbonisation.
It marks the second time this year that the government has pledged taxpayer support to the Tata Group, after it agreed in July to provide the owner of Jaguar Land Rover several hundred million pounds towards a £4bn electric car battery gigafactory.
TV Narendran, the chief executive of Tata Steel, positioned the Port Talbot deal as a positive, describing it as the largest investment in the UK steel industry for decades, but confirmed that job cuts would follow.
“[It] provides an optimal outcome for all stakeholders,” he said. “We will undertake a meaningful consultation with the unions on the proposed transition pathway in the context of future risk and opportunities for Tata Steel UK. We will work to transform Tata Steel UK into a green, modern, future-ready business.”
Tata Steel said it would soon start a consultation on its plans, including “potential deep restructuring of the carbon-intensive, unsustainable iron and steelmaking facilities at Port Talbot”.
However, the GMB union said the deal would be devastating for the steel industry and “rip the heart out” of the Port Talbot community that is dependent on the site.
“This deal will have devastating consequences for jobs and workers,” said Gary Smith, the general secretary of the GMB. “It will rip the heart out of the Port Talbot community.”
Smith added that the GMB had been calling for investment in the UK steel industry for years but said the government has “dithered and delayed until it is too late. Thousands of workers, their families and communities will pay the price.”
The company said it would now be able to “ensure [the] continuity of steelmaking in Port Talbot” and that the government support meant “the project has a robust investment case”.
However, Labour accused the government of failing the steel industry in a deal that uses taxpayers’ money to make mass job cuts.
“Only the Tories could spend £500m of taxpayers’ money to make thousands of British workers redundant,” said Jonathan Reynolds, Labour’s shadow business and trade secretary. “The Conservatives have presided over a decade of failure when it comes to steel, with 13,000 fewer steelworkers now than under a Labour government.”
Tata said that the capital cost of the redevelopment on Port Talbot would cost £1.25bn, including a grant from the UK government of “up to” £500m, and could be completed within three years of gaining all regulatory and planning approvals.
The government said modernising the furnaces at Port Talbot would reduce the UK’s entire carbon emissions by 1.5% – the site is the UK’s largest single carbon emitter – and “safeguard over 5,000 jobs across the UK”.
The business and trade secretary, Kemi Badenoch, said: “The UK government is backing our steel sector. This proposal will secure a sustainable future for Welsh steel and is expected to save thousands of jobs in the long term.”
The government said it was also working with Tata Steel and the Welsh government to set up a transition board with up to £100m funding to support employees and the local economy affected by the large-scale job cuts.
The company said its overhaul of Port Talbot would result in Tata Steel’s balance sheet being restructured, including the “elimination of the current cash losses in the UK”.
Tata Steel also intends to invest £20m over four years to set up two innovation and technology centres, one in Manchester and one in London, focusing on research in sustainable design and manufacturing.
