Tata is ‘very close’ to securing £500m UK state aid for its Welsh steel plant

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India’s Tata Group is “very close” to a deal that will free up £500m of British taxpayers’ money to support greener steel production at its main British plant, in the first test of Labour’s industrial policy.

Natarajan Chandrasekaran, the chairman of the holding company for the Indian conglomerate, told the Financial Times that Tata, which also owns UK car brand Jaguar Land Rover, is planning more investment in the UK. These include expanding the hotel outside of London.

JLR, which is building a battery factory in Somerset, would spend “at least £4 billion a year over the next four or five years” in capital expenditure, Chandrasekaran added.

However, the businessman urged the government to remain “business friendly” as concerns grow over sweeping new measures Labor is considering to tilt power from employers to workers.

“We have been here for a very long time and we are not looking for alternatives – we will continue to invest here,” Chandrasekaran said in an interview in London. He called Britain a “second home market” in which it was “deeply entrenched”.

The company is one of the largest foreign investors in the UK, employing more than 70,000 people in its operations in the country, which together generate annual revenues of around £12bn.

The chairman of Tata, which owns the Port Talbot plant in Wales, added that talks on the steel deal were “going well” and that the company intended to close the deal “any time now”.

The Financial Times reported last week that a deal was imminent. Sources close to the talks have confirmed that ministers are preparing to make an announcement to MPs on Wednesday.

Under the deal, the government will provide £500m towards a £1.25bn investment in a new electric arc furnace at Port Talbot, which will melt scrap steel. Tata Steel has already started winding down its blast furnace operations, with the second of the two furnaces set to close at the end of September. The closure will reduce the number of jobs at the plant by up to 2,500.

“As painful as it is, it’s the right step,” Chandrasekaran said of the closings.

Tata initially brokered a deal with the previous Conservative government, but it was not ratified before July’s general election. The deal with Labor includes Tata’s commitment to consider investing in new steel plate technology. It will also involve support for its other sites in Wales, including Llanwern, according to sources close to the discussions. Union officials expect the number of immediate mandatory layoffs to be lower than originally feared.

Chandrasekaran said the blast furnaces must close and the aim is to “create sustainable steel production”. Dad, he added, wanted to move “very quickly” to green steelmaking by building the electric arc furnace.

Labor has pledged a further £2.5 billion to help revitalize the steel industry. News of the Tata deal comes amid concerns that British Steel – Britain’s second largest steelmaker, owned by China Jingye – is preparing to announce plans to close its Scunthorpe blast furnaces. That would also lead to thousands of job losses.

Ministers are engaged in what a person familiar with the process said were “incredibly challenging” last-minute talks over the future of the Scunthorpe plant. The government is trying to prevent Jingye from abandoning long-standing negotiations with the government to switch to electric arc furnaces in exchange for a subsidy of more than £500 million.

On electric vehicles, Chandrasekaran also said “more policy clarity” was needed on what engine manufacturers could sell between 2030 and 2035, as well as commitments on creating the necessary charging infrastructure.

Last year, the then-Conservative government delayed a ban on the sale of new diesel and petrol cars from 2030 to 2035. Growth in electric vehicle sales has slowed due to consumer concerns about costs as well as a lack of infrastructure.

There is uncertainty over whether the Labor government will return to the 2030 target and whether manufacturers will still be able to sell hybrid models.

Tata’s comments also come as the Labor government has signaled it will hold consultations with carmakers on its 2035 target, according to people familiar with the matter.

“This (electrical) transition has to happen,” Chandrasekaran said. “We just have to make sure there’s clarity.”