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The British government is in advanced talks with Tata Steel UK over a funding package worth more than £500mn to help the country’s largest steelmaker switch to greener technology.
Tata operates two blast furnaces at its Port Talbot plant in south Wales. It has been in talks with officials for months about financial support to help it move to less carbon-intensive electric arc furnaces.
The government made an initial offer of £300mn in direct support, including help with future energy costs, in January, but it was rejected by Tata.
A revised offer of more than £500mn is now being discussed, two people familiar with the talks confirmed on Saturday. A final offer could be as high as £600mn, one of the people said. Sky News first reported the revised offer.
Tata and British Steel, which operates two blast furnaces at Scunthorpe in Lincolnshire, have both repeatedly warned that they need taxpayer support to invest in less carbon-intensive steelmaking. Tata said last year it would have to close Port Talbot without aid.
British Steel, which is owned by China’s Jingye, was also offered a £300mn support package by ministers in January and remains in talks with the government.
Analysts have estimated that it could cost up to £2bn to decarbonise Tata’s operations. The Indian-owned company employs about 4,000 workers at Port Talbot, which uses two blast furnaces to turn iron ore and coal into molten iron and steel. In total, the company has 8,000 staff in the UK.
The aid package would help to secure steelmaking in the UK, but closing the blast furnaces would involve significant job losses as electric arc furnaces require fewer people to operate. Tata’s coke ovens would also no longer be required.
Community, the steelworkers’ union, said on Saturday that it had not agreed “any decarbonisation strategy for Port Talbot”.
“We continue to support a solution that will maintain blast furnace production and safeguard the future of all UK plants,” it added, warning that it was “ready to use all means at our disposal to protect jobs and our vital strategic industry”.
Tata Steel said it remained in talks with the UK government over a “framework for continuity and decarbonisation of steelmaking in the UK amid very challenging underlying business conditions given that several of its heavy end assets are approaching end of life”.
It added: “Given the financially constrained position of our UK business, any significant change is only possible with government investment and support.”
The Department for Business and Trade said it did not comment on “ongoing negotiations”.