Britain is to pump £500 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 total funding package for Britain’s biggest steel works includes £750 million 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 per cent, noting that Port Talbot is the biggest single carbon emitter.

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

Company bosses have warned that the UK is falling behind the US, 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 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, the parent company of Tata Steel, in July to build an electric vehicle battery plant in England.

Unions up in arms

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.

“Unions should have had a seat at the table throughout this process, as it is clear the interests of the workforce have not been considered in the rush to sign off a deal to do decarbonisation on the cheap,” the Community steelworkers, which is among those concerned about the arrangements, said.

Stephen Kinnock, Opposition Labour MP for Aberavon which covers Port Talbot, said the investment to decarbonise was long overdue but that he was concerned that ministers did not “adequately consult steel unions”.

Tata Steel’s chief executive officer and managing director T.V. Narendran said the proposed project with one of the largest investments in the UK steel industry in recent decades, provides an opportunity for an optimal outcome for all stakeholders.

“We will undertake a meaningful consultation with the Unions on the proposed transition pathway in the context of future risk and opportunities for Tata Steel UK,” Narendran said.

UK Chancellor Jeremy Hunt said the proposal is a landmark moment for maintaining ongoing UK steel production — supporting sustainable economic growth, cutting emissions, and creating green jobs.