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The UK government will pledge £500m of taxpayers’ money to help Britain’s biggest steelworks in South Wales switch to greener forms of steelmaking, but the broad deal will still result in the loss of around 2,500 jobs.
Business Secretary Jonathan Reynolds said on Wednesday that the new deal “does what previous agreements failed to do — give hope for the future of steelmaking in south Wales”.
Under the deal, Indian-owned Tata Steel will invest £750m of its own money as it closes blast furnaces at Port Talbot and begins building “electric arc furnaces”, which are more environmentally friendly but less labour-intensive.
Steel unions described the deal as a “miserable missed opportunity” that raised questions about whether the UK’s transition to a low-carbon economy would come at the direct cost of massive job losses in the country’s industrial heartlands.
Tata, which currently employs around 8,000 people across the UK, including 4,000 at Port Talbot, will employ around 5,200 people once the transition is complete.
“It is clear this is not where we want to be and we know there is a better plan,” the GMB community and trade unions said in a statement.
These unions have urged Tata Steel to consider keeping one of the blast furnaces running until 2032 while a new one is built over the next three to four years.
Natarajan Chandrasekaran, chairman of the Indian conglomerate’s parent company, told the Financial Times in a interview on tuesday that “as painful as it is, this is the right step” to put the industry on a viable and sustainable path.
Until recently, Port Talbot was the UK’s largest carbon emitter and needs to reduce its carbon emissions if the government is to meet its net zero climate target.
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 redundancy terms as well as a comprehensive training and skills package.
Workers will be offered a voluntary severance payment equivalent to 2.8 weeks of earnings for every year they work at Tata — up from the original offer of 2.1 weeks a year.
Under the terms of the deal, full-time employees will receive a minimum severance payment of £15,000, plus a one-off “retention” payment of £5,000.
A small number of employees at risk of compulsory redundancy – estimated to be between 300 and 400 – could see their redundancy delayed by a year if they opt for a retraining scheme, which will see them receive a full month’s salary and then £27,000 over the next 11 months.
The deal also includes an increased penalty if Tata fails to retain 5,000 jobs across the UK once the transition is complete.
The company will also explore additional investments at its Port Talbot site, although the government did not provide specific details.
The Labour government, which has promised to invest £2.5bn to help the steel industry move to greener forms of steelmaking — in addition to the £500m investment for Tata — is expected to publish a strategy for the industry next spring.
Steel unions said the deal was “nothing to celebrate” but insisted it had secured key concessions, including a skills and staff retention programme, as well as investment commitments from the company.
“This deal is nothing to celebrate but… it is better than the disastrous plan announced by Tata and the Conservatives in September 2023,” Roy Rickhuss, the Communities general secretary, and Gary Smith, of the GMB, said in a joint statement.
Union members are now voting on whether to accept the revised memorandum of understanding signed 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 greener, cleaner future for the UK steel industry 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 Labour government would sacrifice thousands of jobs just to cut a small fraction, 1.5 per cent, of the UK’s emissions.”
Jo Stevens, the Welsh secretary, acknowledged it was a “very difficult time” for Tata workers, their families and the wider community, but said: “This government is determined to support workers and businesses in our Welsh steel industry, whatever happens.”
