UK Signs Green Steel Deal with Tata Steel

London, Sep 11 (PTI) The UK government on Wednesday announced that it had signed off on an “improved” grant funding agreement with Tata Steel, worth GBP 500 million, to support the Indian steel major's green transition towards a state-of-the-art Electric Arc Furnace (EAF) at the Port Talbot steelworks in South Wales.

Business and Trade Secretary Jonathan Reynolds told the House of Commons that the Labour government had succeeded in going much further than the previous Tory government's pact, delivering a minimum voluntary redundancy payout of GBP 15,000 for full-time employees plus a GBP 5,000 “retention” payment. The pact also includes an offer of paid-for training to give workers a steady income and upskill them for the jobs of the future.

“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,” said Reynolds.

“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 GBP 3 billion of government investment,” he said.

The Department for Business and Trade (DBT) said alongside making the largest investment in the UK steel industry in decades, Tata Steel has also committed to work with the government to evaluate new investments in steel.

“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,” said Jo Stevens, Secretary of State for Wales.

“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,” she said.

Tata Steel has offered what is described as its “most generous” voluntary redundancy package ever for a restructure of this size. Employees who choose redundancy will be paid 2.8 weeks' earnings for each year of service, up to a maximum of 25 years, according to the terms of the pact.

The DBT claims "watertight conditions" within the grant funding agreement will ensure that the government can “claw back investment” should Tata Steel not fulfill its commitments. This includes increased penalty payments should the company not retain 5,000 jobs across its UK business post transformation.

“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,” said T V Narendran, Tata Steel Chief Executive Officer and Managing Director.

“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,” he said.

The Mumbai-headquartered company said as part of this largest investment in the UK steel industry for decades, its GBP 1.25 billion project will safeguard the country's “steel sovereignty, secure steel making in Port Talbot and preserve 5,000 jobs”.

Alongside a planned GBP 750 million investment, Tata Steel said it has put its significant global engineering and project capabilities behind the project, which will benefit from the UK Government Grant Funding.

An Electric Arc Furnace uses an electric current to melt scrap steel or iron and produce steel, whereas blast furnaces use coke, a carbon-intensive fuel made from coal to produce steel. The company confirmed that basic engineering is now complete, and equipment orders will be placed shortly for the Electric Arc Furnace 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.

With the public consultation on track for planning approvals by November, Tata Steel plans to commence large scale site work around July 2025. Under this timeline, the Electric Arc Furnace is expected to be operational within three years.

The trade unions said they had resolved to negotiate the “best possible deal”, and then put it to a ballot of the membership.

“This is what we have done, and voting is underway," reads a joint statement from Community and GMB.