(Bloomberg) -- The UK’s Labour government confirmed a £500 million ($655 million) support package to save Tata Steel’s plant in Port Talbot, though the loss of thousands of jobs risks disappointing a key section of the party’s base.
Business Secretary Jonathan Reynolds said the deal — much of which was drawn up by the previous Conservative government but was subject to further negotiation by Keir Starmer’s administration — included better support for workers facing redundancy as Tata closes its blast furnaces and invests in a new, greener, less labor-intensive electric arc furnace.
But speaking in the House of Commons, Reynolds had to defend an outcome he said “falls short of what would be my ideal,” having previously said he wanted to see jobs saved at the site in Wales after Tata warned its plans would put 2,800 jobs at risk. The deal didn’t achieve the protection of those roles, with the government instead focusing on commitments it said it had secured from Tata on issues like re-training of workers and future investment.
“This was the maximum improvement that was possible within two months,” Reynolds said, referring to the negotiations since July’s election. He accused the Conservatives of abandoning talks ahead of the vote, and investment in supporting industries that could have eased the transition to new technology was not made. “The first thing I had to do before I even became the Secretary of State was make sure there was something there to save,” he said.
Though Reynolds appeared to have the support of Labour MPs in Parliament, the Port Talbot deal is the latest example of the new government grappling with its economic and political inheritance. Starmer’s party surged to power on a promise of change and renewal after 14 years of the Tories, but has since made a series of announcements that have made clear that Britons will have to wait before seeing major improvements.
Port Talbot and its steelworks is a good example. Manufacturing and industry has long provided the bedrock of Labour’s traditional support, while steelmaking — or at least a modernized version of it — is critical to the government’s industrial strategy and transition toward a greener economy.
Yet even with those intentions, Reynolds repeatedly acknowledged the government hadn’t got exactly what it wanted. “We’ve bargained hard,” he said. Given a better hand, he added, “we could have done more.”
India-based Tata Steel is one of Britain’s biggest steelmakers, but its operations have struggled for years to turn a profit. Sales in Europe have been weak amid rising cost pressures and competition from Asian imports.
In April, the company said it would proceed with a £1.25 billion plan to build an electric arc furnace at Port Talbot and start closing existing heavy-end assets. That followed months of national-level discussions with UK trade unions that threatened industrial action over expected job losses.
Labour has said it wants to support Britain’s steel industry, and made a commitment in its manifesto to set up a £2.5 billion green steel fund.
Reynolds said the deal with Tata would mean workers taking voluntary redundancy receive a minimum payout of £15,000 and would be offered paid-for training to gain new skills. He also said Tata would have to return £40,000 to the government for every job it cuts after the support package is delivered, a condition he said would incentivise Tata not to make further redundancies.
The question for Labour on Port Talbot, and on its other looming economic decisions, is how long they can continue to blame the Conservatives — and how long the British public allows the government to do so.
“This was a dereliction of duty and it has left the steel industry in particular in an extremely perilous position,” Reynolds said.
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