The UK has locked in around 3,000 job losses from Port Talbot and Grangemouth. Another 2,000-3,000 are at risk, with uncertainty over British Steel’s Scunthorpe facility.

The steel work at Port Talbot and Scotland’s only refinery have been linchpins of the UK’s industrial age. There is a place for them in the energy sector of the future, but it will be challenging to address the impact on local families and communities.

The job losses are not unexpected, but they hit hard.

Around 2,000 workers at Port Talbot have expressed interest in voluntary redundancy. About 2,500 are expected to lose their jobs by March.

Tata Steel will provide training for those losing their jobs. The government said the payment terms were the “most generous voluntary redundancy package ever” offered by Tata. Workers will receive 2.8 weeks of earnings for each year at the facility, up to a maximum of 25 years.

The company’s commitments come as the government contributes £500 million towards Tata’s efforts to overhaul its industrial processes and construct electric arc furnaces (EAFs).

Tata agreed the government could reclaim investments if the company doesn’t meet its obligations. There are “penalty payments” if it does not retain 5,000 jobs in its UK business.

Tata Steel UK employs around 8,000 people in total. Of these, 6,500 are in Wales and 1,500 in the rest of the UK.

Grangemouth

The government announced the Port Talbot plans on September 11, followed by news on Grangemouth. The job losses there are smaller than under the Tata plan, but they have a significant impact.

Petroineos confirmed the decision to close the refinery. Scotland’s refinery will halt operations in the second quarter of 2025, resulting in 400 job losses.

Late last year, the refiner flagged its plans for the site. The facility has struggled financially. The plan is to transform the site into a fuel import and distribution depot. It currently employs around 475 people, but a depot would need fewer workers.

Refinery chief Frank Demay said fuel demand was declining and overseas competition increased.

The UK and Scottish governments responded to the Petroineos announcement by agreeing to provide another £20mn. This comes on top of the previous growth deal, which provided £80mn.

The two governments said they would provide “tailored support” for workers to find new jobs.

Scotland’s Cabinet Secretary for Net Zero and Energy Gillian Martin said the workforce was “highly skilled, highly experienced”. She was confident new employers would recognise this opportunity.

Brass neck

The government plans to invest £2.5 billion in steel, plus £500mn for Port Talbot.

Secretary of State for Business and Trade Jonathan Reynolds said the aim was to increase “our UK capabilities … so that we can create a more vibrant and competitive steel sector in the UK”.

Inevitably, the opposition voiced criticism. Shadow secretary Greg Smith said Labour was “presiding over the demise of our steel sector.” He criticised shutting down blast furnaces before starting the EAF.

The last furnace will halt work at the end of this month. The last coke delivery was on September 2.

“Is this not the New Labour playbook – scrap jobs, scrap production and become reliant on higher-polluting countries for imports? That is not what I call decarbonisation,” Smith said.

Reynolds said he had “never heard a contribution with such brass neck”.

Time and money run short

He said the Conservative government wasted time. The UK’s two blast furnace sites, at Scunthorpe and Port Talbot, run at a loss.

He said keeping these facilities open while building EAFs would have been preferable. “But all the time that could have been used to work on that was during the Conservative Government, and they did not do that work. There are therefore far fewer options available to us and the situation is far more challenging.”

Warnings have been issued that British Steel will close its Scunthorpe furnace by year-end, causing 3,000 job losses. British Steel is working on replacing its old furnaces with an EAF.

Reynolds wanted a transition plan for Scunthorpe, but his options were “heavily constrained.” Operating blast furnaces long-term would require carbon capture and storage (CCS).

The government plans to launch its steel strategy in spring 2025. However, with Port Talbot and Scunthorpe facing imminent blast furnace closures, the UK will have no domestic production.

But what next?

Tata Steel plans to proceed with its EAF, while the government considers its strategy. The steelmaker intends to submit a planning application in November for the new EAF.

It aims to start site work in July 2025 and begin operations of the new facility within three years.

Grangemouth is uncertain. EY is conducting a £1.5mn study, Project Willow, into options for the facility. There are three main options: low carbon hydrogen production, e-fuels and sustainable aviation fuel (SAF).

An appealing option is SAF for local consumption. Grangemouth is part of the Forth Green Freeport project, as is Edinburgh Airport. The latter aims for net zero by 2045, including air traffic.

Change is inevitable. Tata CFO Koushik Chatterjee said closing the blast furnace is “critical to address the deep cash burn associated with the upstream end of life assets”.

The company said Port Talbot is losing about £1mn per day. Meanwhile, Grangemouth is losing just under £400,000 per day.

Port access

The EAF proposal allows Port Talbot to “reset that economic position” of losses, said Ben Burggraf, CEO of Net Zero Industry Wales.

The EAF will let the facility access domestic scrap metal, currently exported “to countries like Turkey and coming back as a finished product, like rebar,” he explained, speaking before the Tata announcement. “That allows you to reset your global competitiveness, as well as an organisation.”

The challenge is around the jobs. Burggraf called for a wider “industrial coastal plan” to consider the opportunities from the energy transition.

New opportunities are emerging in the region. He cited RWE’s Pembroke power plant, which is working on carbon capture and shipping plans, the Milford Haven CO2 project and others.

A coastal plan could secure new land for decarbonisation projects. In this context, Tata’s plans to release land come into focus. The company will relinquish 385 acres for redevelopment, offering scope for new industries.

As the government aims high for offshore wind, the country will need more developable land with port access.

Job losses will occur as a result of these structural shifts in the UK’s economy. Blast furnaces and small refineries are out of step with the transition needs. But workers at these facilities have transferable skills to other heavy industries.

There’s a way to find a new through line, from refining to hydrogen or SAF, from steel making to turbines or supporting infrastructure.

Workers have been understandably hesitant to jump into the transition. As it becomes more of a necessity to move into new roles, training and skills will be paramount.

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