UK government poised to back Tata Steel with £500mn subsidy

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The UK government is poised to announce a £500mn-plus subsidy to secure the future of Britain’s biggest steelworks at Port Talbot in Wales but it will not prevent the ultimate loss of about 3,000 jobs.

The long-awaited agreement with India’s Tata Group is expected to be unveiled this Friday, according to two people familiar with the talks. Under the terms of the deal, the Indian company will invest around £700mn of its own money into the operations to help it move to greener forms of steelmaking. 

The deal is intended to secure the survival of the sprawling plant but would eventually lead to the loss of as many as 3,000 jobs, the two people said, with Port Talbot bearing the brunt of the losses as the site’s two blast furnaces would be closed over time.

Port Talbot employs half of Tata Steel’s 8,000-strong workforce and one government official said without the state-backed deal all those jobs would have been vulnerable.

Tata warned last year that its UK operations were under threat unless it secured government funding to help it move to less carbon-intensive electric arc furnaces. The expected level of state backing is significantly less than the company had initially sought.

“The alternative to any deal is 8,000 jobs lost. This is another example of the prime minister resolving a longstanding issue,” the official said. “Tata’s original asks were in the billions, so this would represent a huge UK government win for value for money,” they added. The government declined to comment

But the main steelworkers’ union said it had not agreed to the closure of the blast furnaces and would resist any job cuts.

Alun Davies, national officer for the Community union, said it did “not support switching to an electric arc furnace model” and called for “a full and meaningful consultation on all the options to decarbonise steelmaking and secure the future of every UK plant”. He said the union would do “everything within its powers to support our members and protect their jobs”.

Tata Steel said it remained in discussions with the UK government over a “framework for continuity and decarbonisation of steel making in the UK”. Given the “financially constrained position of our UK business, any significant change is only possible with government investment and support”, it added. 

Just two months ago, the government, which ditched its official industrial strategy in 2021, pledged £500mn in subsidies to Tata Motors, another subsidiary of India’s Tata Group, to support a new £4bn battery factory in Somerset.

Jonathan Reynolds, Labour’s shadow business secretary, said the government had “scrambled around” for a “last-minute deal” with Tata Steel that would still entail huge job losses.

“Only this government could spend £500mn to make thousands of people redundant and deliver no safeguards on the nation’s investment,” he said. “This is not a serious plan for the long term for our steel industry.”

Ministers have separately been locked in negotiations with British Steel, the UK’s other big producer in the sector, over grants worth hundreds of millions of pounds for new electric arc furnaces in northern England. An announcement is expected in the coming weeks. 

The UK’s steel industry, which had over 300,000 workers in its heyday in the 1970s, has shrunk over the years and now employs an estimated 39,800 according to trade body UK Steel. The industry faces acute competition from imports and the challenge of decarbonisation. 

Gareth Stace, UK Steel director, said the government support would help deliver “huge opportunities” for the industry as it sought to drastically cut its carbon emissions.