Labour approves 2,800 job cuts in steel industry

Labour is to invest £500m in Britain’s biggest steelworks in a deal that will cost 2,800 jobs.

In a first test of the new government’s industrial strategy, Business Secretary Jonathan Reynolds insisted the taxpayer-funded subsidy would help secure Port Talbot’s future.

Indian giant Tata Steel, which owns the plant in south Wales, will also invest £750m, bringing the total budget to £1.25bn.

This will mean coal-fired blast furnaces will be phased out and replaced by an electric arc furnace in an effort to meet the net-zero emissions target. Labour insisted it was “a better deal” than the one agreed by the Conservatives and accused the previous government of “a dereliction of duty” that left the steel industry “in an extremely perilous position”.

But critics pointed out that the Conservative-Tata deal also involved £500m of taxpayer funding and the loss of 2,800 jobs.

Labour MPs were outraged by the deal announced by Rishi Sunak’s administration last October. At the time, Reynolds, then shadow business secretary, said: “Only the Conservatives could spend £500m of taxpayers’ money to make thousands of British workers redundant.”

Last night Labour was accused of raising false hopes on jobs. Samuel Kurtz, the Conservative Party’s spokesman on business and energy in the Welsh parliament, said ministers had been “untrue with their promises to the people of Wales and had fallen short with their new offer, putting steelworkers’ jobs at risk”.

Conservative business spokesman Greg Smith said the job losses represented a “heartbreaking transition” and accused Labour of “presiding over the demise of our steel sector”.

Reynolds insisted that the “improved agreement” was the best deal he could have signed. It included better severance conditions for workers and a training program for laid-off employees.

Speaking in the House of Commons, Reynolds said: “I wish we were in a position to do even more, but I think this was the maximum improvement possible in two months.”

Steelworkers’ unions said “this deal is nothing to celebrate” but was better than the “devastating” deal struck by the Tories.

“It is clear this is not where we wanted to be and we know there was a better plan available,” the Community and GMB unions said.

Up to 2,500 jobs could be lost over the next 18 months and another 300 could be lost over three years. The dismissed workers will receive 2.8 weeks’ pay for each year of service, up to a maximum of 25 years.

With the average steelworker’s salary being around £40,000, an employee with 25 years’ service could be paid almost £54,000. The minimum will be £15,000 for full-time employees.

Employees facing compulsory redundancy will be offered a year-long paid training programme. Ministers will be able to claw back cash if Tata does not continue to employ at least 5,000 workers in the UK.

The electric arc furnace will melt scrap steel in a more environmentally friendly way than creating new metal.

Tata will close its remaining blast furnace at Port Talbot this month. The first one closed in July after 65 years.

Tata CEO TV Narendran said: “With critical support from the UK government, this complex and ambitious transformation of Port Talbot has the potential to make the plant one of Europe’s leading hubs for green steelmaking.”

The company will apply for planning approval in November, with a view to starting work on the site next July.

Chinese-owned British Steel, which has two furnaces in Scunthorpe, is also in talks with the government about transitioning to cleaner manufacturing.