Tata Steel secures £500m in government “green” aid but job losses still feared

TATA STEEL has secured £500m (US$619m) in backing from the UK government to decarbonise its Welsh site in a deal that could still see as many as 3,000 workers lose their jobs. 

Described by the government as one of the largest support packages in history, Tata Steel is expected to invest £750m of its own money into plans to build a new electric arc furnace (EAF) for greener steel production at Port Talbot – a site the firm has owned since 2008. 

This would replace the four existing coal-powered blast furnaces which are nearing the end of their effective life, the government said, and reduce the UK’s entire carbon emissions by around 1.5%. 

EAFs melt scrap and recycled metal – a feature that has led some to question the end quality of the steel – by passing an electric current through graphite, or sometimes carbon electrodes. This creates an arc when it makes contact with the metal, resulting in temperatures inside an EAF soaring above 1,700^oC. 

Managing the temperature within the system is easier than a blast furnace, making it more efficient, and EAFs also negate the need for a constant coke supply.  

But this efficiency comes at a cost, a human one, and despite the sizeable government investment, around 3,000 of the 8,000 workers employed by Tata Steel UK could be at risk of losing their jobs.  

Speaking on BBC Radio Wales, the Welsh secretary, David TC Davies said it was "terribly sad" not all jobs could be saved. “We did everything we can to save jobs and to make sure the steel continues to be made, but I'm not going to shy away from the fact that this is still terrible news.” 

Tata Steel UK, which is owned by the Tata group, an Indian conglomerate that recorded a consolidated turnover of US$32.83bn at the end of the 2022 financial year, said it had been facing “significant challenges [at Port Talbot] due to the heavy-end facilities approaching their end of life”.  

It warned last year that it would shut down operations in the UK if the government did not agree to provide £1.5bn of subsidies to help it reduce carbon emissions, though concerns over Port Talbot’s future have been ongoing for some time.  

Commenting on the announcement, Natarajan Chandrasekaran, Tata group chairman, described it as "a defining moment for the future of the steel industry". 

The £1.25bn EAF is expected to be up and running within three years of getting regulatory and planning approvals. A broad range of support, backed by £100m in funding, will be provided for staff who are affected by the transition, ministers said. 

Stephen Kinnock, Labour MP for Aberavon, told the BBC that the investment to decarbonise was long overdue, but that he was concerned that ministers did not "adequately consult steel unions", while Jonathan Reynolds, shadow business and trade secretary, said: "Only the Tories could spend £500m of taxpayers' money to make thousands of British workers redundant.” 

From steel to batteries to freeports

This is the second £500m aid package Tata has recently received from the government. Last month, the group was in talks to secure funding to support a £4bn battery factory in the UK that will power a new generation of Jaguar Land Rover electric vehicles. 

Port Talbot, specifically the ABP Port adjacent to Tata Steel UK, is also the site of the proposed Celtic Freeport which was given the green light earlier this year. The government said it expects Tata to release land for transfer or sale following the EAF upgrade, so that the development of the green-focused freeport can create 16,000 new jobs, while generating up to £5.5bn of new investment.