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Tata Steel: Port Talbot

Volume 737: debated on Monday 18 September 2023

The Government have agreed on a proposed joint investment package to provide £500 million to Tata Steel as part of their proposed £1.25 billion project to move to low carbon steel making in Port Talbot, subject to the necessary information and consultation processes that will be led by the company.

Through investment in a state-of-the-art Electric Arc Furnace at Port Talbot, this deal will support the UK’s efforts to meet increasing demand over the next decade and enable industry to take a significant step towards decarbonisation. It will strengthen our supply chain resilience, as well as protect thousands of skilled jobs across South Wales and the UK for the long term.

The Conservative Government have been supporting the UK steel industry for many years. The industry has been acutely impacted by recent wider geopolitical and macro-economic developments that have made traditional, blast-furnace steelmaking financially unviable. The global steel market has become saturated with heavily subsidised, carbon-intensive steel, while Putin’s invasion of Ukraine has dramatically increased energy costs. This Conservative Government will continue to stand by our steel industry, and this deal is part of our long-term plan for UK steel.

This ambitious transformation is the culmination of several years of negotiations between the Government and Tata Steel, and is one that has been backed by a majority investment by the company.

This transition will:

Secure continued production of steel at Port Talbot;

enable the industry to take a significant step towards decarbonising; and

provide a clear pathway towards a long-term financially and environmentally sustainable business model, removing the repeated need for Government intervention.

The Government are also enabling this major transformation and modernisation of the steel sector through key policy changes, including delivering the British Industry Supercharger to make electricity prices competitive for energy intensive industries.

Steel is a strategically significant industry which plays a vital role in the UK economy. The sector supports tens of thousands of UK jobs and remains a key driver for local economic growth in regions with proud steelmaking histories. It is also an industry in urgent need of modernisation. Decarbonising industry is a global challenge to meet the temperature goals of the 2015 Paris Agreement.

By replacing Port Talbot’s existing coal-powered blast furnaces, and assets nearing the end of their effective life, with an Electric Arc Furnace, this proposed project is 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%.

This agreement with Tata represents the best offer and result for the UK and the people of South Wales. This package represents one of the largest support offers in recent history and will secure long term jobs, not just in Port Talbot, but across all of Tata Steel’s sites in England and Wales. It is a deal that not only safeguards jobs, but one that will help build greater resilience in the UK economy and will help create new opportunities in our construction, automotive and energy sectors.

During this transition, the UK Government will also ensure a broad range of support for staff who are affected by the transition, working with the Welsh Government and Tata Steel to provide up to £100 million of funding—in addition to the transformation investment —for a dedicated taskforce to support both employees and the local economy.

As part of the proposal Tata Steel will also release land in Port Talbot for redevelopment and use for new industrial businesses. Alongside the UK Government’s proposal for the Celtic Freeport and the land at Port Talbot which Tata expects to release for transfer or sale following the transition from blast furnaces, the investment could help unlock thousands of new jobs in both the South Wales and wider UK economy.

The funding proposal is subject to extensive scrutiny of detailed business plans, vigorous due diligence and subsidy control assessments. It will include strong conditions around financial probity, governance and delivery.

The landmark proposal builds on other major investments in UK green technology by Tata Group, including the July announcement of a £4 billion battery gigafactory creating 4,000 direct jobs, and represents a major vote of confidence in the UK.