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The British government is preparing to announce a subsidy of more than £500 million to secure the future of the UK’s largest steelworks in Port Talbot, Wales, but this will not prevent the eventual loss of around 3,000 jobs.

The long-awaited agreement with India’s Tata Group is expected to be announced on Friday, according to two people familiar with the matter. Under the terms of the deal, the Indian company will invest around £700m of its own capital in operations to help it switch to more environmentally friendly steelmaking methods.

The pair said the deal was designed to ensure the survival of the massive plant but would ultimately result in the loss of up to 3,000 jobs, with Port Talbot bearing the brunt as the plant’s two blast furnaces will be shut down. time.

Port Talbot employs half of Tata Steel’s 8,000-strong workforce and a government official said all those jobs would be affected without a state-backed deal.

Tata warned last year that its UK business would be under threat unless it received government funding to help it switch to less carbon-intensive electric arc furnaces. The expected level of state support is significantly lower than what the company had originally sought.

“The alternative to any deal is the loss of 8,000 jobs. This is another example of the Prime Minister addressing a long-term problem,” the official said. “Tata’s original request was in the billions of dollars, so this would represent a huge win for the UK government in terms of value for money,” they added.The government declined to comment

But the main steelworkers union said it disagreed with the blast furnace closures and would resist any layoffs.

Alan Davies, national officer for the Community union, said it “does not support a switch to the electric arc furnace model” and called for “full and meaningful consultation on all options for decarbonising steelmaking and ensuring that every plant in the UK future”. He said the union would “do everything in its power to support our members and protect their jobs”.

Tata Steel said it was still in discussions with the UK government on the “continuity and decarbonisation framework for UK steel production”. It added that given the “constrained financial position of our UK operations, any significant changes are only possible with government investment and support”.

Just two months ago, the government, which abandoned its official industrial strategy for 2021, pledged a £500m subsidy to Tata Motors, another subsidiary of India’s Tata Group, to support a new £4bn battery factory in Somerset. .

Labour’s shadow business secretary, Jonathan Reynolds, said the government had “rushed” to reach a “last-minute deal” with Tata Steel but that the deal would still result in massive job losses.

“Only this government can spend £500m cutting thousands of jobs and providing no guarantees for investment in the country,” he said. “This is not a serious long-term plan for our steel industry.”

Ministers have separately negotiated grants worth hundreds of millions of pounds for new electric arc furnaces in northern England with British Steel, another big producer in the UK steel industry. An announcement is expected in the coming weeks.

The UK steel industry employed more than 300,000 workers at its peak in the 1970s but has shrunk over the years and now has around 39,800 workers, trade body British Steel estimates. The industry faces fierce competition from imports and the challenge of decarbonisation.

Gareth Stace, a director at British Steel, said government support would help unlock “huge opportunities” for the industry as it seeks to slash carbon emissions.


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