Tata secures £500m state aid for Port Talbot steelworks

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The UK government will commit to a £500m taxpayer bailout to help Britain’s biggest steelworks in South Wales switch to greener forms of steelmaking, but the sweeping deal will still see it lose of approximately 2,500 jobs.

Business Secretary Jonathan Reynolds said on Wednesday that the new agreement “does what previous agreements failed to do – it gives hope for the future of steelmaking in South Wales”.

Under the deal, India-owned Tata Steel will invest £750 million of its own money as the company closes its blast furnaces in Port Talbot and begins building an “electric arc furnace” that is greener but requires less labor.

Steel unions described the deal as a “tragic missed opportunity” that raises questions about whether Britain’s transition to a low-carbon economy will come at the immediate price of huge job losses in the country’s industrial heartland.

Tata, which currently employs around 8,000 people in the UK, including 4,000 in Port Talbot, will eventually employ around 5,200 once the transition is complete.

“This is clearly not where we wanted to end up and we know a better plan was available,” the community unions and the GMB said in a statement.

These unions have pushed Tata Steel to consider keeping one of its blast furnaces open until 2032 while the new furnace is built over the next three to four years.

Natarajan Chandrasekaran, the holding company chairman for the Indian conglomerate, told the Financial Times in an interview on Tuesday that “as painful as it is, it is the right step” to put the industry on a viable and sustainable path.

Port Talbot was until recently the UK’s biggest carbon emitter and needs to decarbonise if the government is to achieve its climate zero targets.

While the terms of the deal are broadly similar to the one Tata Steel agreed in principle with the previous Conservative government a year ago, the company has pledged to improve layoff conditions and a comprehensive skills and training package.

Workers will be offered a voluntary redundancy payment of 2.8 weeks’ earnings for each year they have worked at Tata – up from an initial offer of 2.1 weeks a year.

Under the terms of the agreement, full-time employees will receive a minimum severance payment of £15,000, plus a one-off ‘retention’ payment of £5,000.

A smaller number of staff facing compulsory redundancies – estimated at 300 and 400 – could see this delayed by a year if they choose to enter a retraining programme. Under the scheme, they will receive one month’s full salary and then £27,000 for the next 11 months.

The deal also includes increased penalty payments if Tata does not retain 5,000 jobs across its UK business once the transformation is complete.

The company will also explore further investment at the Port Talbot site, although the government has not provided specific details.

The Labor government, which has pledged to invest £2.5bn to help the steel industry switch to greener forms of steelmaking – on top of the £500m for Tata – is to publish a strategy for sector next spring.

Steel unions said the deal was “not something to celebrate” but insisted they had won important concessions, including a skills retention program as well as investment commitments from the company.

“This deal is nothing to celebrate, but . . . it is better than the devastating plan announced by Tata and the Tories in September 2023,” Roy Rickhuss, general secretary of the Community, and Gary Smith, GMB, said in a joint statement.

Union members are currently voting on whether to accept the revised memorandum of understanding with Tata.

Reynolds, who announced the deal in the House of Commons, said the deal would set out a “long-term vision for a bright and sustainable future” for the steel industry.

“We know that a cleaner and greener future for UK steelmaking is vital to the long-term economic stability of the industry. The road ahead is not without challenges,” he added.

But one union leader said: “It is unbelievable that a Labor government would sacrifice thousands of jobs just to reduce a tiny fraction, 1.5% of UK emissions.”

Jo Stevens, the Welsh Secretary, admitted it was a “very difficult time” for Tata workers, their families and the wider community, but said: “This Government is committed to supporting steel workers and businesses in Wales whatever would happen”.