3 minute read - 12th September 2024
Government finalises £500m funding agreement with Tata Steel
Tata Steel and the UK government have formally signed a grant funding agreement worth £500m, allowing Tata Steel to proceed with its plans to install a greener electric arc furnace at its Port Talbot steelworks in Wales and secure the future of the site. Trade body UK Steel said this signifies the biggest investment in the UK’s modern steel sector. As reported in September 2023, Tata Steel is expected to invest a total of £1.25bn, including the government grant but 2,500 workers are set to be made redundant.
The national steel industry is facing challenging market conditions. Costs remain high, the global market is oversupplied, while market demand has weakened, and the highly competitive international business landscape has made capital investment falter.
The government’s National Wealth Fund (NWF) manifesto commitment has assigned another £2.5bn to build and attract investment in the UK’s steel industry. The sector remains essential to the nation’s prosperity, supplying steel for major national infrastructure projects, such as for offshore wind turbines needed by GB Energy, transport, housing, and defence.
Tata Steel and the UK government have finalised a £500m funding deal, allowing Tata Steel to proceed with its plans to install an electric arc furnace at its Port Talbot site / Picture: Tata Steel
To meet these ambitions, the next step on the path to growth will be government action to deliver affordable electricity prices. UK Steel analysis, released this September, found that UK steel producers pay up to 50% more than competitors in France and Germany, adding £37m to the UK steel sector costs. With a switch to more electric arc furnaces, it is expected that the sector’s electricity consumption will roughly double.
Gareth Stace, director general of UK Steel, said: “The steel sector wants to remain a pillar of the UK’s economy and today’s grant funding agreement between Tata Steel and the government means our steel sector can have a brighter future. £1.25bn is one of the biggest investments we’ve seen in the history of the nation’s steel sector. We now have a government that understands the issues facing our industry and crucially is committed to taking decisive action and today it has done just that.
“To ensure that their significant investment yields returns for our nation, government must now also deliver the right business environment. Steel businesses need competitive electricity prices, access to good quality steel scrap, and fair competition from international trade. The government clearly intends to make good on its manifesto promise of building up steel with £2.5 billion investment, backing British jobs, growth and economic resilience.”
T V Narendran, chief executive officer and managing director of Tata Steel, said: “With the UK government’s critical support, this complex and ambitious transformation of Port Talbot has the potential to make the plant one of Europe’s premier centres for green steelmaking. I would like to thank the UK Steel Committee and various departments of the UK and Welsh governments for their support in reaching this agreement. We now look forward to the efficient and speedy execution of the EAF project. We will also continue our work with the Transition Board and the UK and Welsh governments to enable this project to be a catalyst for economic regeneration and job creation in South Wales.”
