In a significant announcement, the UK government and Tata Steel on 15 September unveiled a combined investment package worth 1.25 billion pounds which included a 500 million pound government subsidy in Wales, where the largest steelworks in the United Kingdom are located. Tata Steel and the UK government will invest in a state-of-the-art Electric Arc Furnace steelmaking plant at the Port Talbot site with a capital cost of £1.25 billion, said a statement by Tata Steel.
PM Sunak took to X (Twitter) to react to the crucial business deal. He called it a “big day for UK steel” and highlighted that it would “save thousands of British jobs and secure the future of the steel industry in Wales.” He also mentioned that the development came after a “£4 billion investment we secured from Tata Group.”
A big day for UK steel 🇬🇧
— Rishi Sunak (@RishiSunak) September 15, 2023
We've agreed a joint £1 billion investment with @TataSteelLtd to save thousands of British jobs and secure the future of the steel industry in Wales.
This follows the £4 billion investment we secured from @TataCompanies in July to create 4,000 jobs. https://t.co/2XdrXWhOTP
India’s Tata Steel owns the Port Talbot steelworks, which is the biggest steel-producing plant in Britain. However, the plant is running into losses, raising questions about its future, which prompted this mega deal.
The capital at the Port Talbot would modernise manufacturing with state-of-the-art Electric Arc Furnace steelmaking and decrease Britain’s overall carbon emissions by approximately 1.5%. It has been dubbed as one of the largest UK government support packages in history. According to Tata Steel, the proposed investment would reduce the Port Talbot site’s carbon emissions by around 5 million tonnes a year.
The UK government said the transition to electric furnace was expected to reduce the UK’s entire business and industry carbon emissions by 7%, Wales’s overall emissions by 22% and the Port Talbot site’s emissions by 85%.
The company will be replacing the two blast furnaces at the plant with Electric Arc Furnaces, which will reportedly result in the loss of around 3,000 jobs, as electric furnaces require substantially less manpower to run compared to fossil fuel-fired blast furnaces. The plant currently has around 4,000 employees. However, as the deal means that the plant will not close down, it will result in the protection of the remaining jobs, including jobs at downstream units. According to the UK govt, around 5,000 jobs across the UK will be saved by the deal.
Tata Steel released a statement which read, “The project would bolster U.K.’s steel security and would be the first major step towards decarbonisation of the local steel industry, reducing direct emissions by 50 million tonnes over a decade. With a high degree of circularity, it would leverage strategic, domestically available scrap steel and promote local value addition within the UK.”
The planned project would make Tata Steel U.K. a sustainable, capital-efficient and profitable company while ensuring that the steel industry at Port Talbot would continue after the changeover. The press release further conveyed that the venture has a strong investment case owing to the assistance of the U.K. Government.
Tata Steel will also set up 2 Centres for Innovation at the Henry Royce Institute in Manchester and at the Imperial College, London. The company already operates a research and development centre at the University of Warwick (co-located with Jaguar Land Rover’s automotive research centre and the Advanced Steel Research Centre) and also works closely with the Steel and Metals Institute at Swansea University.
It proclaimed that the carbon-intensive, unsustainable iron and steelmaking facilities at Port Talbot, where many of the existing “heavy end” assets, such as blast furnaces and coke ovens are approaching the end of their operational life, would shortly be the subject of consultation by Tata Steel U.K.
The proposed project would also entail reorganising Tata Steel’s balance sheet, potentially eliminating the company’s ongoing cash losses from its U.K. operations and legacy investments’ non-cash impairment.
Tata Steel U.K. observed that it would work hard during the transition and project phase to ensure an uninterrupted and dependable supply of products to meet customer and market commitments, including through the import of additional steel substrates from dependable supply chains for consumption by its downstream units.
Tata Group Chairman N. Chandrasekaran noted, “The agreement with the U.K. Government is a defining moment for the future of the steel Industry and indeed the industrial value chain in the U.K. It has been an absolute pleasure to work with His Majesty’s Government and the Honourable Prime Minister Rishi Sunak in developing the proposed transition pathway for the future of sustainable steelmaking in the U.K.”
He remarked, “The proposed investment will preserve significant employment and presents a great opportunity for the development of a green technology-based industrial ecosystem in South Wales.”
He called it a “defining moment” for the future of the steel industry. “It has been an absolute pleasure to work with His Majesty’s government and Prime Minister Rishi Sunak in developing the proposed transition pathway for the future of sustainable steelmaking in the UK.”
“Tata Steel U.K. has been facing significant challenges due to the heavy end facilities approaching their end of life. The proposed project with one of the largest investments in the U.K. Steel Industry in recent decades, provides an opportunity for an optimal outcome for all stakeholders,” pointed out T.V. Narendran, CEO and Managing Director of Tata Steel.
He stressed, “We will undertake a meaningful consultation with the unions on the proposed transition pathway in the context of future risk and opportunities for Tata Steel U.K. With the support of the U.K. Government and the dedicated efforts of the employees of Tata Steel U.K. along with all stakeholders, we will work to transform Tata Steel U.K. into a green, modern future-ready business.”
According to UK Business and Trade Secretary Kemi Badenoch, the government is providing a “historic” amount of support. She stated, “It will not only protect skilled jobs in Wales but also grow the UK economy, boost growth and help ensure a successful UK steel industry.”
The plan, per British Finance Minister Jeremy Hunt, is a “landmark moment” for sustaining UK steel production, promoting sustainable economic growth, reducing emissions, and generating green jobs. “It is right that we are ready to step in to protect this world-class manufacturing industry and to support a green growth hub in South Wales.”
However, Tata Steel has added that the investment is subject to all relevant information and consultation processes before decisions are made. If everything goes as planned, the new investment project could be operational within 36 months of the receipt of relevant regulatory and planning approvals. Tata Steel will work to finalise the terms of the grant funding agreement with the UK Government and engage with the Welsh Government to seek requisite approvals and permits for the proposed project. The company will disclose any detailed transition and restructuring plans, in due course, subject to the outcome of all applicable consultation processes, it said.
Tata Steel had initially demanded £1.5 billion in subsidy, but has agreed with £500 million.
