British Steel and Tata Steel have been informed that a six-month freeze on layoffs is one of the conditions of a £600 million government rescue package.
The two largest steel producers in the United Kingdom would be expected to promise thousands of jobs for a decade in exchange for £600 million in government funding to help decarbonize the industry.
Grant Shapps, the business secretary, has instructed Tata Steel and British Steel to protect UK-based jobs for ten years to obtain government financing.
A source in the steel sector stated on Friday that the two businesses have not yet been informed of the percentage of their workforces that will need to be guaranteed until 2033. The numbers will be determined after additional conversations with government authorities.
The government offer included a six-month freeze on layoffs, according to a representative from one of the companies.
British Steel, the UK’s second-largest steelmaker, was nearing a £300 million bailout with Mr. Shapps.
Shapps’ £600m aid offer requires a decade-long steel jobs guarantee
The Financial Times later stated that the same offer had been given to Tata Steel, its larger competitor and that under Whitehall’s proposals, a carbon border tax would be imposed on imported steel.
The enterprise must replace blast furnaces with electric arc furnaces to receive government aid.
British Steel’s Chinese owner, Jingye Group, will be required to invest at least £1bn in the company by 2030. With Tata Steel likely to be asked for a comparable commitment.
Given Chinese ownership of British Steel and worries about its adherence to financial pledges made when it acquired the company out of insolvency proceedings in 2020, the decision to award state help is controversial.
In a December letter to Jeremy Hunt, the chancellor, Mr. Shapps, and Michael Gove, the minister for leveling up, warned that the death of British Steel may cost the government up to £1 billion in decommissioning and other obligations.
They warned Mr. Hunt that British Steel “had no viable business without government assistance.
Mr. Shapps and Mr. Gove stated, “closing one blast furnace would lead to the shutdown of the second blast furnace. Resulting in a highly unstable business model dependent on Chinese steel imports.”
“Given the magnitude of the liabilities expected to fall on HMG in the event of blast furnace closure, and by the PM’s directive, we would like officials to examine whether net Government support in the region of £300 million for British Steel could prevent closure, protect jobs, and create a cleaner, more sustainable future for steel production in the United Kingdom.”
Additionally, they believed that preserving control over steel manufacturing was essential for the UK economy.
Mr. Shapps and Mr. Gove wrote, “Every other G20 nation has maintained domestic steel production, and while we do not believe that this should come at any cost, we do believe it is in HMG’s interest to offer well-designed and targeted funding that unlocks private investment, achieves a good outcome for taxpayers, and enables transformed, decarbonized, and economically viable domestic steel production to continue in the UK over the long term.
We don’t want to depend on foreign steel suppliers like energy security has.
In recent months, the future of British Steel, which was acquired by Jingye from an insolvency proceeding less than three years ago, has grown increasingly uncertain as the company’s owners have indicated they will not continue operations without government assistance.
British Steel employs approximately 4,000 people, with thousands more relying on the company’s supply network.
Tata Steel employs more UK workers, including 4,000 at its Port Talbot steelworks.
According to the letter from the previous month, British Steel had previously told the government that one of the blast furnaces at Scunthorpe could close as early as next month, resulting in the loss of 1,700 jobs.
This would be “followed by the closure of the second blast furnace later in 2023. Resulting in about 3,000 cumulative direct employment losses,” Shapps and Gove wrote.
India’s Tata Steel sold
After a £30 million emergency government loan failed, the Official Receiver took over the company in May 2019.
British Steel was created in 2016 when Greybull Capital bought Tata Steel for £1.
As part of the agreement that gave Jingye ownership of British Steel. The Chinese company stated that it will invest £1.2 billion over the next decade to modernize the company.
The then-prime minister, Boris Johnson, heralded the completion of Jingye’s acquisition of the company in the spring of 2020. As ensuring the future of steel production in Britain’s industrial heartlands.
Contact has been made with the Department of Business, Energy, and Industrial Strategy for comment.
