Has Labour changed its mind on Tata deal?

Martin Shipton

A cut of £500m in the amount Labour says it would commit to public investment in the steel industry has led to speculation that the party has finally accepted Tata will not go back on its plan to cut 1,900 jobs at Port Talbot.

In October 2023 the UK Government announced it would give Tata a £500m grant towards the £1.25bn cost of a new electric arc furnace. The new furnace will melt scrap steel, and end the current carbon-intensive method of producing liquid iron from rock.

But shutting down the existing more labour-intensive blast furnaces will result in 1,900 job losses.Without the £500m grant, however, Tata may have closed its Port Talbot works entirely, with the loss there and elsewhere of a further 5,000 jobs.

Up until now Labour has backed an alternative plan put forward by the trade unions with members employed at Port Talbot that would have seen one of the blast furnaces continue to operate, with employment maintained, until the electric arc furnace was built.

Mumbai

First Minister Vaughan Gething travelled to Mumbai in a failed bid to change Tata Steel’s chief executive’s mind. He was criticised for making the trip at an undisclosed cost with three officials when the chief executive was in London the week before.

The alternative plan has been ruled out by Tata, which says it has been losing more than £1m per day. The company has confirmed it will press ahead with the closure of the heavy end in Port Talbot by the end of September, with construction work on the electric furnace scheduled to begin in August 2025.

A transition board has been established to coordinate support and training opportunities for affected workers.The UK Government pledged £80m towards the fund, while Tata Steel has committed £20m.

Until days ago Labour said that if it took power following the general election on July 4, it would invest £3bn of public money in the steel industry. But when the party’s general election manifesto was published, the amount had reduced to £2.5bn.

Former Bridgend council Labour leader Jeff Jones, who spotted the change, contacted NationCymru to say: “I presume they have agreed to let Tata proceed with the plan agreed with the Tory government.That would explain the difference.

“The point is that Tata holds all the cards, as the statement the company made to the Mumbai Stock Exchange showed.”

Restructuring 

In a statement to the Mumbai Stock Exchange on June 11, Tata Steel confirmed that it would continue with its announced closure of assets and restructuring program at the plant in the coming months. “We urge and request the current and the incoming government post-election, to adhere to and safeguard the agreed terms of the £500m package of support for the electric arc furnace project announced in September 2023”, Tata Steel said in the statement.

One blast furnace at Port Talbot is scheduled to close by the end of June, and the other by the end of September, the company said. The plant plans to continue to service customers by using imported, semi-finished steel until the new furnace is built and commissioned.

The Labour Party’s official line is that it has called for Tata Steel to make “no irreversible decisions” before the general election.

But Mr Jones wrote on X: “Why does the manifesto say £2.5bn for steel when previously it was £3bn? What has happened to £500m? Have you already told Tata that they will have it? Do you now expect both blast furnaces in Port Talbot to close by the end of September?”

Shadow Business Secretary Jonathan Reynolds responded to Mr Jones on X saying: “It’s £2.5bn on top of the existing money already pledged by Govt (ie the £500m), so in total £3bn for Green Steel.”

Clarification

We sought further clarification from a source close to Shadow Welsh Secretary Jo Stevens, asking whether the reduction to £2.5bn in the manifesto meant Labour was now going along with the plan agreed by the Tory government to give Tata £500m to mitigate the job losses.

The source said: “It’s not less than the originally quoted £3bn – it’s that the govt has already invested £500m, which hasn’t been spent yet by the way, and we’ll keep that.”

Asked for clarity whether the deal negotiated between Tata and the Tory government would go ahead, the source would only say: “Sunak’s timing of the election makes everything very difficult. We’ll have to see where things stand if we are trusted by the public to form the next government.”