Tata Steel has signed a £500 million Grant Funding Agreement with the UK Government which it says allows it to proceed ‘at pace’ with a project to install an Electric Arc Furnace (EAF) at the Port Talbot steelworks.
The UK Government described the deal as ‘new and improved’ and said that negotiations had delivered improved redundancy terms and a skills package for employees who want to earn whilst they retrain.
Tata Steel said it was offering its ‘most generous-ever’ support package to employees leaving the company, and a comprehensive voluntary redundancy process combined with cross-matching and/or re-skilling.
A minimum voluntary redundancy payout of £15,000 will be in place for full-time employees plus a £5,000 ‘retention’ payment. Employees who choose redundancy will be paid 2.8 weeks’ earnings for each year of service, up to a maximum of 25 years.
The Government said that 2,000 staff members have expressed interest in voluntary redundancy under this deal.
For any employee in Port Talbot selected as being at-risk of compulsory redundancy, the company will provide the option for them to participate in a paid re-training scheme.
Employees on this training programme will be on full pay for the first month and £27,000 per annum for 11 months following. These salary costs will be funded by Tata Steel, which also anticipates that at least 500 new jobs will be created to support the construction of the Electric Arc Furnace.
Tata Steel decided in January to close both blast furnaces at its Port Talbot site, putting 2,800 jobs at risk.
It says the move to the EAF will reduce the UK’s entire industrial carbon emissions by 8% and Port Talbot’s by 90% while setting a benchmark in circularity, utilising UK scrap.
Tata Steel said that plans are progressing to close Blast Furnace #4 and the wider heavy-end operations at Port Talbot by the end of September, with supply chain arrangements in place to serve customers through the transition period until the EAF is commissioned.
Basic engineering is now complete, the company said, and equipment orders will be placed shortly for the EAF and ladle metallurgy furnaces, a new coil box and crop shear for the hot strip mill, a cranes package, and for construction management and civil engineering.
Tata Steel has already launched a public consultation on specific activities and plans to apply for planning approvals by November 2024, with a view to starting large scale site work around July 2025. The EAF is expected to be operational within three years.
T V Narendran, Tata Steel Chief Executive Officer and Managing Director, said:
“With the UK Government’s critical support, this complex and ambitious transformation of Port Talbot has the potential to make the plant one of Europe’s premier centres for green steelmaking. I would like to thank the UK Steel Committee and various departments of the UK and Welsh Governments for their support in reaching this agreement.
“We now look forward to the efficient and speedy execution of the EAF project. We will also continue our work with the Transition Board and the UK and Welsh Governments to enable this project to be a catalyst for economic regeneration and job creation in South Wales.”
Secretary of State for Wales, Jo Stevens, said:
“This improved deal secures the immediate future of Port Talbot steelworks, lays the foundations for future investment, and enhances protections for the workforce across South Wales, all without further cost to the taxpayer.
“As well as negotiating a better deal than the previous government, we have already released millions of pounds of funding from the Transition Board to support businesses and workers in Port Talbot and across south Wales.
“While this is a very difficult time for Tata workers, their families and the community, this Government is determined to support workers and businesses in our Welsh steel industry, whatever happens.”
As part of the deal, Tata Steel will be releasing 385 acres of their site for redevelopment. The UK Government said this would help bring in more companies and employers from a host of other industries.
The Business and Trade Secretary Jonathan Reynolds also announced that a new strategy for the steel sector will be published in Spring 2025 after consultation with industry and stakeholders.
He said:
“Port Talbot has always been and will always be a steelmaking town. This deal does what previous deals failed to do – give hope for the future of steelmaking in South Wales.
“Steel is fundamental to the UK’s economy, sovereignty, and communities, but previous government inaction has blighted the steelmaking industry. That’s why this Government is taking strong action through a new deal and strategy which will reverse the industry’s stagnation and set out a long-term vision for a bright and sustainable future.
“We know that a cleaner, greener future for UK steelmaking is vital to the industry’s long-term economic stability. The road ahead is not without its challenges but our steel strategy will set forth a positive vision for the future of the industry, backed by our manifesto commitment to £3 billion of Government investment.”
Cllr Rob Stewart, Chair of the Swansea Bay City Deal and Leader of Swansea Council, welcomed the deal, saying:
“First, this package of support is welcome news for Tata steelworkers, their families and their local communities. After a period of great uncertainty, they now have clarity and a way forward.
“The investment means Tata can move ahead to secure the future of its plants and the steel industry in South Wales, with a focus on green steelmaking through a new electric arc furnace at Port Talbot.
“The closure of the steelworks and the entire loss of steel making in South Wales would have been a devastating blow to the whole of the Welsh economy, but especially for us here in the Swansea Bay City Region. While, as the Government has said it is not a perfect deal and does not achieve everything, it does give a future to steel making on South Wales.
“Now, by backing the new £1.2bn electric arc furnace, the government is supporting work we are doing across the Swansea Bay City Region to develop our reputation for innovation, new technologies and skills that boost economic growth.”
Paul Morozzo, senior campaigner at Greenpeace UK, said:
“This is an improvement on the previous government’s proposals but unfortunately it doesn’t yet do enough to protect jobs and this country’s ability to produce green steel.
“We urge the government to heed the warnings of the past and invest fully in industries of the future. Tackling the climate crisis presents a huge opportunity to create good sustainable jobs, unlocking new economic opportunities for communities all over the country.
“Proper investment in UK green steel production would help our renewable energy supply chain whilst supporting workers and communities in places like Port Talbot and Scunthorpe, rather than having to rely on polluting imported steel to build wind turbines.”
