UK agrees £500m funding deal with Tata Steel
The government will invest £500m into Tata Steel’s UK operations alongside an “improved deal” for workers to support the transition to greener steel production, business secretary Jonathan Reynolds confirmed today.
Workers at the country’s biggest steel plant in Port Talbot, south Wales, will receive “improved” redundancy terms and the offer of a skills package, he said.
Unions are currently balloting members on the new plans, which will see minimum voluntary redundancy payouts of £15,000 for full-time employees plus a £5,000 ‘retention’ payment.
Staff at risk of compulsory redundancy will be offered a retraining programme on full pay for the first month, and at £27,000 per annum for the remainder of the year, paid for by Tata.
Tata has also pledged to work with the government to evaluate future UK investment opportunities, and ministers have vowed to invest £2.5bn into decarbonising the industry.
Tata’s own transition is expected to reduce the UK’s overall CO2 emissions by around 1.5 per cent, the Department for Business and Trade (DBT) has said.
The company confirmed basic engineering was complete, with equipment orders set to be placed for the electric arc furnace (EAF), ladle metallurgy furnaces, and other requirements.
Large scale site work could commence around July 2025, Tata added, while the EAF is expected to be operational within three years.
Some 385 acres of the company’s site will also be released for redevelopment, while around 500 jobs are expected to be created from running the new electric furnaces.
The deal with Tata Steel was agreed yesterday in a meeting between the Prime Minister, the business secretary, the Chancellor, and Tata’s chairman Natarajan Chandrasekaran.
It comes after months of wrangling between Britain’s biggest steel plant and unions over job losses as the company plans to close its remaining blast furnace by the end of the month.
Tata wants to change the way it produces steel, via switching to electric arc furnaces to melt down scrap steel, which is still expected to result in around 2,800 redundancies.
The government confirmed it will contribute £500m to the £1.25bn cost of the transition, as first pledged by the Conservatives, but said it was now agreed the investment could be clawed back if the firm does not retain 5,000 jobs across its UK business after the change. Meanwhile, Tata will invest £750m in the transition.
A wider steel strategy will also be developed alongside the industry, published in spring 2025, which ministers said would ensure a “bright and sustainable future for UK steelmaking”.
Speaking in the House of Commons today, Reynolds said: “Steel is essential to delivering on our net zero goals and the next generation of infrastructure. Work is already underway to increase the role of steel.”
He added: “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 £3bn of government investment.”
Tata’s CEO T V Narendran 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.
“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.”
Welsh secretary Jo Stevens said: “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.”
UK Steel director-general Gareth Stace welcomed the new agreement as “one of the biggest investments in the history of the nation’s steel sector” and indicative of a “brighter future”.
He added: “To ensure that their significant investment yields returns for our nation, the government must now also deliver the right business environment.
“Steel businesses need competitive electricity prices, access to good quality steel scrap, and fair competition from international trade.”
Community and GMB Unions general-secretaries Roy Rickhuss and Gary Smith said the deal was “not something to celebrate” but “better” than the “devastating” plan from 2023.
“Going forward the government must review existing policies and do everything in its power to ensure that decarbonisation does not mean deindustrialisation – you can’t build a greener economy without a healthy steel industry,” they added.
Unite general secretary Sharon Graham said: “The two-stage government commitment to provide serious funding for steel in South Wales is vital for local communities and the long-term future of the steel industry.
“The last government was quite frankly asleep at the wheel.
“The present crisis is a direct result of it failing to invest in the UK steel industry and allowing the companies involved to rundown their operations and let them fall into disrepair. Conservative inaction and disdain have resulted in wholly avoidable job losses.”