Port Talbot to cut 2,500 jobs despite £500m funding

Jonathan Reynolds announced the deal in parliament, admitting it was not the ideal outcome.

• Pramod Thomas
• 11 September, 2024

By: Pramod Thomas

BUSINESS SECRETARY Jonathan Reynolds on Wednesday (11) confirmed that 2,500 jobs will be cut at the Port Talbot steelworks in Wales, even though the government has committed £500 million to help build a new, environmentally friendly electric arc furnace at the site.

This move marks a major setback for the British steel industry, raising concerns about the future of steel production in the country, reported the Guardian.

The government has struck a deal with Tata Steel, the Indian company that owns the Port Talbot plant. Under this agreement, the Indian firm will invest £750m in the project, which aims to ensure the long-term future of steel production at the site.

However, the government could not negotiate terms that would protect the 2,500 jobs that Tata Steel plans to cut in the coming months.

Reynolds announced the deal in parliament, admitting it was not the ideal outcome. He criticised the previous Tory government for failing to secure better conditions for workers in earlier negotiations, describing it as a “dereliction of duty” towards the people of Port Talbot.

Under the terms of the new agreement, employees facing redundancy will receive enhanced severance packages. Tata Steel has also increased the compensation available for those who choose to join a company-run retraining programme.

Additionally, the company has committed to exploring future investments in its steel plants and infrastructure, supported by Labour’s broader £2.5 billion plan for the UK steel sector.

The first of Port Talbot’s two blast furnaces shut down in July, and the remaining furnace will close at the end of this month. This will effectively end the plant’s ability to produce primary steel from raw materials.

The new electric arc furnace, which is expected to be operational by late 2027, will be more environmentally friendly but will require significantly fewer workers. It is anticipated that around 500 jobs will be created during its construction phase.

The loss of jobs is a significant blow to the Labour government, which had previously criticised the Tory administration for agreeing to the £500m funding for Tata without securing job guarantees.

Reynolds had expressed hope for a better deal that included job security for workers in exchange for the investment. However, efforts to keep the second blast furnace operational and save more jobs were unsuccessful due to cost concerns raised by Tata.

The last blast furnace at Port Talbot will close on 28 September, and most employees are expected to leave by Christmas, with nearly all staff gone by March 2025.

However, over 2,000 workers have already shown interest in voluntary redundancy, which now offers 2.8 weeks of pay for each year worked, up to a maximum of 25 years. This is an improvement from the previous offer of 2.1 weeks.

Those who opt for retraining will receive full pay for the first month and an equivalent of £27,000 for the following 11 months.

The agreement also includes Tata’s commitment to explore further investment opportunities in steelmaking facilities, with plans to look into potential upstream and downstream sites.

A new government strategy for the steel sector, focusing on sustainable technologies for primary steel production, is expected in spring 2025.

Unions have cautiously welcomed the enhanced redundancy terms but stressed the need for the government to ensure that efforts to green the economy do not lead to deindustrialisation.

A joint statement from the Community and GMB unions said: “This deal is not something to celebrate, but – with the improvements the unions and the government have negotiated – it is better than the devastating plan announced by Tata and the Tories back in September 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.”