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Tata ‘very close’ to securing £500mn of state aid for UK’s largest steelmaking plant

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India’s Tata Group said it was “very close” to a deal that will release £500mn of UK taxpayers’ money to support greener steelmaking at its main British plant, in the first test of Labour’s industrial policy. 

Natarajan Chandrasekaran, chair of the holding company for the Indian conglomerate, told the Financial Times that Tata, which also owns the UK-based Jaguar Land Rover car brand, was planning more investments in Britain. They include hotel expansion outside of London.

Capital expenditure at JLR, which is building a battery plant in Somerset, would be “at least £4bn a year for the next four or five years”, Chandrasekaran added.

However, the businessman urged the UK government to remain “business-friendly” as concerns rise over sweeping new measures Labour is considering to tilt power from employers to workers.

“We are here for very long and we are not looking at alternatives — we will continue to invest here,” Chandrasekaran said in an interview in London. He called the UK Tata’s “second home market” in which it was “deeply entrenched”. 

The company is one of the UK’s largest foreign investors, employing more than 70,000 people across its operations in the country, which together generate around £12bn in annual revenues. 

Natarajan Chandrasekaran: ‘We are here for very long and we are not looking at alternatives’ © Charlie Bibby/FT

The chair of Tata, which owns the UK’s largest steelmaking plant, at Port Talbot in South Wales, said talks with the British government on a state grant for the facility were “going well” and that a deal was “very close”.

The Financial Times reported last week that a deal was imminent. People close to the talks confirmed that ministers were preparing to make an announcement to MPs on Wednesday. 

Under the agreement, the government will provide £500mn towards a £1.25bn investment in a new electric arc furnace at Port Talbot which will melt down scrap steel.

Tata Steel, the Tata Group subsidiary that runs the Welsh plant, will complete the wind down of its blast furnace operations at the end of September. The closure will cut the number of jobs at the facility by up to 2,500.

“However painful, it is the right step,” Chandrasekaran said of the closures.

Tata had originally brokered a deal about its Port Talbot plant with the previous Conservative government but this was not ratified before the general election in July.

The deal with Labour includes a commitment from Tata to consider investments in new steel plate technology.

It will also involve support for its other sites in Wales, including Llanwern, according to people close to the talks. Union officials expect the number of immediate compulsory redundancies will be lower than originally feared. 

Chandrasekaran said the blast furnaces had to close and that the aim was “creating sustainable steelmaking”. Tata, he added, wanted to move “very quickly” to making green steel by building the electric arc furnace.

Labour has promised an additional £2.5bn to help revitalise the UK steel industry.

News of the Tata agreement comes amid concerns that British Steel — the UK’s second-biggest steelmaker, owned by China’s Jingye — is preparing to announce plans to close its blast furnaces in Scunthorpe. That would also lead to thousands of job losses.

Ministers are engaged in what a person familiar with the process said were “incredibly challenging” last-ditch talks over the Scunthorpe plant’s future.

The government is seeking stop Jingye from abandoning long-running negotiations with ministers to switch to electric arc furnaces in return for more than £500mn of subsidy. 

On electric vehicles, Chandrasekaran said “more policy clarity” was required in the UK on what carmakers could sell between 2030 and 2035, as well as commitments on creating the necessary charging infrastructure. 

Last year, the then Conservative government delayed a ban on the sale of new diesel and petrol cars from 2030 to 2035.

There is uncertainty about whether the Labour government will revert to the 2030 target, and whether manufacturers will still be able to sell hybrid models.

The comments from Tata also come as the Labour government has signalled it will hold consultations with carmakers about whether to stick to the 2035 target, according to people with knowledge of the matter. 

“This [electric] transition has to happen,” Chandrasekaran said. “We just need to make sure that the clarity is there.” 

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