Britain hands $621 million to Tata Steel, 3,000 jobs could go

British steel industry workers protest outside of the Houses of Parliament in London

By Sarah Young

LONDON (Reuters) -Britain is to pump 500 million pounds ($621 million) into Tata Steel to decarbonise its Welsh site, in a deal aimed at securing the future of the country's steel industry but which puts as many as 3,000 jobs at risk.

The 1.25 billion pound total funding package for Britain's biggest steel works includes 750 million pounds investment from Tata to pay for the switch to lower-emission electric arc furnaces from current coal-powered methods.

Britain said Friday's deal would help to safeguard 5,000 jobs, but Tata Steel UK currently employs more than 8,000 people, raising the prospect of 3,000 redundancies, as the lower-carbon electric furnaces are less labour intensive.

Business and trade minister Kemi Badenoch said the deal was the right thing for Britain and the workforce overall.

"We are saving jobs which would have been lost, without this investment we would probably have seen the end of steelmaking certainly in this part of the country," she told reporters.

India-owned Tata Steel had long warned that without government help it could close the Port Talbot site.

Britain said the new electric furnaces would cut the country's total carbon emissions by around 1.5%, noting that Port Talbot is the biggest single carbon emitter.

UK SUBSIDIES

The British government has been under pressure from businesses to help fund a transition to green energy.

Company bosses have warned that Britain is falling behind the United States, which has benefited from the subsidies of the Inflation Reduction Act, and the European Union, which also has incentive schemes.

The government said the 500 million pound steel grant was one of the largest state support packages in UK history. The deal follows an undisclosed level of financing the government provided to Tata Group, parent company of Tata Steel, in July to build an electric vehicle battery plant in England.

British Steel, owned by Chinese company Jingye, which operates coal-fired blast furnaces in Scunthorpe and which has about 4,000 staff, will hope it could be next in line for a grant.

Britain's steel industry directly employs 39,800 people according to figures released by UK Steel in May, and supports a further 50,000 jobs in the supply chain.

The government said Tata Steel UK would now inform and consult with staff and unions.

Trade union Unite criticised the government for not investing more in Port Talbot and failing to secure job guarantees with Tata.

"Unite will be fighting tooth and nail not only to save these jobs but to create more jobs in steel," Unite general secretary Sharon Graham said.

A domestic steel-making industry is crucial to Britain's security because it is used to build warships and fighter jets, as well as underpinning the manufacturing and transport sectors.

($1 = 0.8049 pounds)

(Reporting by Sarah Young, additional reporting by Farouq Suleiman, editing by Elizabeth Piper, Sachin Ravikumar and Jane Merriman)