British Steel and Tata Steel have been told that a six-month moratorium on redundancies is among the conditions of a £600m aid package being prepared by the government, Sky News learns.
Britain’s two biggest steelmakers would be required to guarantee thousands of jobs for a decade in return for £600m of government support to help decarbonise the industry.
A steel industry source has said that the two companies still needed to be told what proportion of their workforces would need to be guaranteed until 2033, with the numbers to be determined after further discussions with government officials.
An executive at one of the companies said they had been told that a six-month moratorium on redundancies was one of the conditions of the government offer.
The government funding will be linked to replacing blast furnaces at the company’s sites with greener electric arc furnaces.
Jingye Group, British Steel’s Chinese owner, would be obliged to invest at least £1bn in the business by 2030, with Tata Steel expected to be asked for a similar commitment.
The decision to grant the state aid is not without controversy, given British Steel’s Chinese ownership and doubts about its adherence to financial commitments made when it bought the business out of insolvency proceedings in 2020.
In a letter to Jeremy Hunt, the chancellor, in December, Mr Shapps and Michael Gove, the levelling up secretary, warned that British Steel’s demise could cost the government up to £1bn in decommissioning and other liabilities.
They cautioned Mr Hunt that British Steel “does not have a viable business without government support”.
“Closing one blast furnace would be a stepping-stone to the closure of the second blast furnace, resulting in a precarious business model dependent on Chinese steel imports,” Mr Shapps and Mr Gove wrote.
British Steel employs about 4,000 people, with thousands more jobs in its supply chain depending upon the company.
Tata Steel employs substantially more people in the UK, including more than 4,000 at its Port Talbot steelworks in Wales.