Tata Steel seals £500m UK support package but big job losses feared
Mark Sweney
Newsflash: The UK government has agreed a £500m support package for Tata Steel to secure the future of the Port Talbot steelworks, my colleague Mark Sweney reports.
Unions said the deal will have “devastating consequences”, with as many as 3,000 workers expected to lose their jobs.
India’s Tata group, which owns the vast steelworks in south Wales – Britain’s biggest – is also expected to inject about £725m to help it transition to greener production methods.
The country’s largest steel producer, which employs about 8,000 staff in the UK, with about half based at Port Talbot, had warned that it faced site closures if a financial support package could not be agreed.
Under the agreement, the government will provide a state aid package worth up to £500m to help switch Port Talbot’s two coal-powered blast furnaces to greener electric arc versions that can run on zero carbon electricity.
Here’s the full story:
Key events
Closing summary
Time for a recap
Under the plan, announced this morning, Tata Steel will inject about £750m into Port Talbot to fund a switch to greener forms of steelmaking using electricity rather than coal.
Tata called it “a defining moment for the future of the steel industry,”
Business and Trade Secretary Kemi Badenoch says it will secure a sustainable future for Welsh steel, and save thousands of jobs in the long term. She says:
This is an historic package of support from the UK Government and will not only protect skilled jobs in Wales but also grow the UK economy, boost growth and help ensure a successful UK steel industry.
But Labour were critical, saying:
“Only the Tories could spend £500m of taxpayers’ money to make thousands of British workers redundant.
Unions also battered the plan, which is expected to lead to around 3,000 job losses as the new electric arc furnace needs fewer workers.
The GMB said the deal will have devastating consequences for jobs and workers, and rip the heart out of the Port Talbot community.
The TUC criticised the strategy, saying:
An electric arc furnace-only model for Port Talbot is simply the wrong approach for making our steel greener.
We need a proper long-term plan for zero-carbon steel-making in this country – not 1980s-style deindustrialisation.
And Unite said it would fight “tooth and nail” to save jobs at Port Talbot, and to create more in steel.
In other news…
Company insolvencies in England and Wales have jumped 19% year-on-year, as firms are hit by rising costs and economic uncertainty.
Russia’s central bank has raised interest rates to 13%, up from 12%, as it tries to ease inflationary pressures and support the rouble.
Shares in Arm have risen on their second day’s trading on the Nasdaq, after a 25% jump yesterday.
European stock markets are rallying too, with the UK’s FTSE 100 up 56 points at 7729, its highest level since late May. That puts the Footsie on track for its biggest weekly gains since last autumn.
TikTok has been fined €345m (£296m) for breaking EU data law in its handling of children’s accounts, including failing to shield underage users’ content from public view.
Train drivers have announced two more days of strikes and an overtime ban across England, timed to bring services to a halt at the start and end of the Conservative party conference.
Oil companies have been granted licences by the government that it hopes will enable them to store up to 10% of the UK’s carbon emissions in old oil and gasfields beneath the seabed.
We’ll be back on Monday. GW
Here’s Tony Bosworth, climate campaigner at Friends of the Earth, on the UK-Tata Steel deal:
“Green steel is the future, but it cannot come at the expense of jobs and communities.
“This announcement exposes the flaws and confusion at the heart of the government’s policymaking. Less than a year ago, it approved a new coal mine, in part to supply companies like Tata Steel, which are already moving to decarbonise production.
“Instead of backing more fossil fuel extraction, the government should be investing in supporting workers and communities as part of a just transition to a zero-carbon economy that’s fit for the challenges of the 21st century. This should include a fair deal to secure a long-term future for Port Talbot that protects workers and creates long-term, sustainable jobs.”
Over on Wall Street, shares in UK chip designer Arm Holdings have opened higher, a day after its US stock market debut.
Arm’ shares jumped more 7% at the open to hit $69 on the Nasdaq, giving it a market capitalisation of $70bn.
But they’ve quickly slipped back to $65.98, giving a valuation of $67.7bn.
Arm was valued at over $52bn when owner Softbank sold 10% of the company to investors through this week’s IPO, at a price of $51 per share.
Yesterday, in its first day of trading, it surged by 25%.
Here’s James Burgess, head of commercial at trade credit firm Atradius UK, on the rise in insolvencies in England and Wales (see earlier post):
“The recent Insolvency Service data shows that businesses across the UK have begun to decline as the number of company insolvencies increased in August to 2,308, a 33% increase from July 2023.
“Our own data reveals that the number of claims for late or failed payments reported to us in Q2 of 2023 was a staggering 26% higher than the same period in 2022, and 165% higher than Q2 in 2021 meaning businesses aren’t yet out of the woods.
This investment will modernise and secure a more sustainable future for the UK steel industry.
It will also protect thousands of skilled jobs in the long-term and help grow the economy 🇬🇧 https://t.co/DjbVLEBStt
— Rishi Sunak (@RishiSunak) September 15, 2023
Back in Wales, there’s a demonstration at the Tata Steel plant in Port Talbot:
Over in Moscow, Russia’s central bank has raised interest rates for the third time in a row as it battles inflationary pressures and the weak rouble.
The Bank of Russia has lifted its key interest rate by 100 basis points, or one percentage point, to 13% from 12% today.
Bank of Russia
Governor Elvira Nabiullina says:
Considering the current conditions, we need to maintain tight monetary policy for a longer period to bring inflation back to the target.
Nabiullina points out that price growth significantly sped up in July, before slowing in August, and that Russia’s foreign currency earnings contracted due to a slump in the value of exports this year (as sanctions imposed since the invasion of Ukraine hit its economy).
The Bank of Russia still expects GDP to expand by between 1.5% and 2.5% this year, although a tight labour market is holding back growth.
Nabiullina explained:
In the second quarter, GDP rose by 4.9% year-on-year. Such a high growth rate means that the economy is recovering after last year’s downturn.
Besides, according to our assessments, the part of the economy focusing on domestic demand has generally exceeded the level of late 2021. We expect the expansion to be more moderate in the second half of the year, which is natural after a period of fast recovery growth.
Norway wealth fund tells companies to plan for climate transition
In other news today, Norway’s sovereign wealth fund has revealed stricter demands for how companies it invests in should handle climate risk.
The $1.4trn fund, which is the world’s largest, wants boards to move from target setting to transition planning.
The fund’s Chief Governance and Compliance Officer Carine Smith Ihenacho said in a statement:
“With the effects of climate change becoming more evident, we really saw the need to sharpen our expectations,”
The fund also published a policy concerning the use of voluntary carbon credits, which it said companies could use in certain cases, explaining:
“We believe companies should prioritise reducing own emissions but can use additional and verified credits as a supplement to signal high climate ambitions.”
Carbon credits should not be counted towards science-based interim emission reduction targets, and companies must be transparent about the details of credits they use, it added.
“Ultimately, carbon removals will be needed by many companies seeking to achieve net zero emissions by 2050.”
Back in February, Norway’s sovereign wealth fund warned company directors it will vote against their re-election to the board if they do not up their game on tackling the climate crisis, human rights abuses and boardroom diversity.
Unite mounts campaign to protect steel jobs
The Unite union has described the plans laid out by the UK government and Tata for Port Talbot’s steel works as ‘a disgrace’ and has said it will fight them.
Unite are unhappy that the government has not secured any job guarantees in return for its “mere £500m” investment, to replace the two existing blast furnaces with one electric arc furnace at the Port Talbot steelworks.
The plans follow a decades long path of UK steel industry shrinkage and substantial job losses, it warns.
Unite general secretary Sharon Graham said:
“These plans are disgraceful, short sighted and lack ambition. Steel is a foundation industry and the opportunity is being missed to make the UK a world leader in steel production.
Unite will be fighting tooth and nail not only to save these jobs but to create more jobs in steel.”
“These plans are disgraceful, short sighted and lack ambition. Steel is a foundation industry and the opportunity is being missed to make the UK a world leader in steel production.” @UniteSharon 1/2https://t.co/de7BTfydXU
— Unite the union: join a union (@unitetheunion) September 15, 2023
Peter Walker
The UK government insists that maintaining Port Talbort’s existing blast furnaces was not an option, my colleague Peter Walker reports.
Rishi Sunak’s official spokesperson told reporters today:
We recognise that this will have been an anxious time for employees and their families while this work to find the right way forward has taken place for those that are affected.
“We’re working with the Welsh government and with Tata Steel to establish a dedicated transition board which supports employees and the economy affected, worth up to £100m in total.
And there are significant opportunities for people in the area, including through the new Celtic free port which is due to create 16,000 jobs.
But it’s important to note that simply maintaining blast furnace production, ie the status quo, was not an option with the steel industry needing a sustainable future using more modern technology and practices.”
Today’s £500m grant for Tata Steel is the latest hefty subsidy bill in recent months to persuade companies to stay in Britain.
Bloomberg reports that:
More broadly, the payment will again underscore the precarious state of British industry in the absence of a state-driven industrial strategy, compounded by the impact of Brexit and the disruption to trade with the European Union.
In July, the government put forward £500 million in support for a new battery plant established by Tata Group’s Jaguar Land Rover. A smaller package was given to BMW AG, who said it would make its Mini electric models in the UK.
Still, it’s not just the UK under pressure. US President Joe Biden’s package of tax credits for green industry has also threatened to lure investment and business away from other nations, setting off an international scramble to keep pace. Sunak is expected to unveil a UK manufacturing plan later this year.
UK will pay up to £500 million to help Tata Steel keep the country’s biggest steelworks running, the latest hefty subsidy bill to persuade companies to stay in Britain https://t.co/IC1vpmtUBV
— Bloomberg (@business) September 15, 2023
