New UK govt pushes Tata Steel to protect local jobs before approving grant

The new UK Labour government insists on job protection at Tata Steel's Port Talbot plant as a condition for approving a £500 million support package for the company's low-carbon transition project

The newly elected Labour government in the UK is expected to demand that Tata Steel safeguard local jobs at its Port Talbot plant before approving a £500 million ($635 million) support package initially offered by the previous administration. According to a report by The Economic Times, this aid is intended to facilitate the construction of a low-carbon facility.

The business-daily reported that Jonathan Reynolds, the new UK Business Secretary has said “decarbonisation does not equate to deindustrialisation”. He reiterated his commitment to protecting jobs as part of the negotiations, aiming to secure the future of steel-making communities.

In September 2023, Tata Steel revealed plans for a new low-carbon electric arc furnace (EAF) at its Wales factory, slated for commissioning in 2027. This project involves a joint investment of £1.25 billion with the UK government, contingent upon the final approval of the grant.

 

Following the recent political shift with the Labour Party coming to power, Tata Steel may face stringent negotiations and potential modifications to the agreement made with the previous Conservative government, the report claimed citing officials close to the matter.

Port Talbot currently operates with a traditional blast furnace. Transitioning to an EAF is expected to eliminate around 2,800 jobs, a move that has sparked strong opposition from local unions. 

Tata Sons Chairman N Chandrasekaran acknowledged the difficulties of this transformation at a recent shareholders’ meeting, highlighting the challenge for employees who may lose their jobs in the UK. He emphasised the company’s efforts to support these employees through skill development programs.

Tata Steel’s financial struggles in the UK

Tata Steel UK has been struggling with loss-making operations due to high structural costs and energy prices. In FY24, the company reported an operating loss of £364 million, attributed to the end-of-life condition of its heavy-end assets, production disruptions, and high fixed and maintenance costs.

Despite the governmental change, Tata Steel’s strategy for its UK operations remains consistent. The plan, involving a £1.25 billion investment agreed upon by the previous Conservative government, includes a £500 million grant to transition from emission-intensive blast furnaces to green steelmaking through EAFs.

Tata Steel shuts down blast furnace in South Wales

Earlier this month, Tata Steel shut down one of its two blast furnaces at Port Talbot, coinciding with the UK’s election day. The decommissioning of blast furnace number 5 aligned with the company’s previously outlined timeline, with the remaining heavy-end assets expected to be phased out by late 2024, Business Standard had reported.

Approximately 1,500 Tata Steel workers in Port Talbot and Llanwern in Wales announced an indefinite strike starting July 8 in response to the planned job cuts and blast furnace closures, as reported by the trade union Unite. This marked the first steelworker strike in the UK in over 40 years.

Meanwhile, the new British government is prioritising the prevention of job losses in its discussions with Tata Steel over the £500 million support package. Business minister Jonathan Reynolds has expressed hopes for an improved deal with Tata, which could help mitigate some of the anticipated job losses as the company transitions to lower-carbon technologies.