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Tata Steel has secured a monumental £500 million government support package in a watershed moment. It is poised to unlock a staggering £1.25 billion investment towards developing a cutting-edge, environmentally conscious electric arc furnace at its Port Talbot steelworks in South Wales. This state aid initiative is being hailed as one of the most substantial in the annals of the UK's industrial history.
The collaborative investment endeavour, unveiled today, stands as a bulwark against an uncertain future for the beleaguered steelworks. Currently, the Port Talbot facility holds the dubious distinction of being the UK's largest emitter of CO2, primarily due to its reliance on aging coal-powered blast furnaces, which are approaching the end of their operational lifecycle.
Tata Steel, an Indian-owned steel giant, maintains a workforce of 8,000 individuals across the UK, including Port Talbot. The company had previously sounded alarm bells, warning of the imminent threat to jobs and the need for government intervention to replace the ageing furnaces with greener manufacturing technologies. These technologies align with the global demand for cleaner and more cost-effective steel and emphasize sustainability.
Yet, it's essential to underscore that adopting electric arc furnace technology, powered by electricity for melting and repurposing scrap and recycled metal, could result in a less labour-intensive operation. This aspect casts a shadow of uncertainty over approximately 3,000 jobs at the site.
In today's announcement, the government asserted that the agreement, still subject to consultation led by Tata Steel, has the potential to safeguard up to 5,000 jobs across the UK. Nevertheless, union representatives decried the news as a "devastating blow" to steelworkers in Port Talbot.
From a broader perspective, the government's declaration signifies a significant vote of confidence in the UK's future of green steel production. It foresees a shift away from coal-powered production at Port Talbot that could reduce total UK carbon emissions by approximately 1.5 per cent.
"The UK government is backing our steel sector, and this proposal will secure a sustainable future for Welsh steel and is expected to save thousands of jobs in the long term," said Business and Trade Secretary Kemi Badenoch. "This is a historic package of support from the UK government and will not only protect skilled jobs in Wales but also grow the UK economy, boost growth, and help ensure a successful UK steel industry."
This announcement follows swiftly on the heels of another government-supported initiative secured by Tata Group in July, involving the construction of a £4 billion UK battery gigafactory to bolster electric vehicle manufacturing in the country. The value of this state support is estimated to be in the hundreds of millions of pounds.
Notably, the government has steadfastly resisted calls for a more coordinated clean technology subsidy program in response to heightened global competition for green investments, spurred by initiatives like the US Inflation Reduction Act and the EU's net-zero subsidy plans.
Prime Minister Rishi Sunak and Chancellor Jeremy Hunt have advocated against the UK being drawn into a global green trade war. They contend that the UK remains well-positioned to compete internationally as the race for clean technology investment intensifies.
But today, Hunt said it was "right" to provide state support to safeguard the future of Port Talbot steelworks by supporting the transition to greener manufacturing processes at the site.
"This proposal is a landmark moment for maintaining ongoing UK steel production - supporting sustainable economic growth, cutting emissions, and creating green jobs," he said. "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."
Furthermore, the government has pledged to offer "a broad range of support" for employees affected by the shift to electric arc furnace technology in Port Talbot. It is collaborating with Tata Steel and the Welsh Government to establish a dedicated transition board, supported by £100 million in funding, to assist affected workers and the local economy.
Ian Price, director of CBI Wales, described the investment in safeguarding the steelworks' future at Port Talbot as "undoubtedly welcome" but stressed the need for robust support for affected workers.
"It's crucial that policymakers and local businesses now step in to provide support and equip those Tata workers facing possible redundancy with the tools they need to make a swift return to the job market," he said. "Their expertise is vital amid a growing skills gap facing so many industries."
However, the Trades Union Congress (TUC) hit out at the package today as "the opposite of a just transition," given the likelihood of thousands of job losses. It added that unions had been locked out of crucial talks.
"Ministers must press pause and urgently get around the table with unions," said TUC general secretary Paul Nowak. "Instead of safeguarding livelihoods in the steel industry, this deal will see thousands of good, unionized jobs potentially lost forever."
Nowak argued that solely utilizing electric arc furnace technology at the site was "simply the wrong approach for making our steel greener," as he called for a deeper, more detailed plan for harnessing various technologies and processes to decarbonize UK steelmaking.
"We need a proper long-term plan for zero-carbon steelmaking in this country - not 1980s-style deindustrialization," he said. "Other countries - like America and Germany - are working in partnership with unions and employers to protect their manufacturing heartlands. We should be doing the same.
"Tackling climate change can go hand in hand with creating and protecting good jobs. The Conservatives are presenting a false choice."