Tata claims steelmaking in south Wales at risk if £500m subsidy is delayed

The Port Talbot steelworks in south Wales may be ‘put in peril’ during the general election campaign, Tata said.Photograph: Ben Birchall/PA

Tata Steel has claimed that steelmaking in south Wales could be “at significant risk” if a £500m subsidy package is delayed, after the shadow business secretary, Jonathan Reynolds, called for it to restart talks with a potential Labour government.

The Indian company said it was concerned that the government support to replace the polluting blast furnaces with cleaner electric versions may be “put in peril” during the general election campaign, in a statement to London’s stock market on Tuesday.

The two blast furnaces in Port Talbot, south Wales, plus another two in Scunthorpe, Lincolnshire, under Chinese-owned British Steel are among the biggest carbon polluters in the UK, and both companies are planning to switch to new electric arc furnaces which rely on recycled steel. However, the plans have caused concern among politicians and resulted in strike threats from workers because the newer technology requires far fewer workers.

Related: Union plans to escalate action over job losses at two steelworks in Wales

Tata insisted that it would not backtrack on plans to make as many as 2,800 workers redundant at Port Talbot and another south Wales site in Llanwern. The first blast furnace is due to close at the end of June, with the loss of the bulk of the jobs in September when the second furnace and the rest of the “heavy end” that transforms iron into steel will close.

Tata insisted that extending the lives of the blast furnaces was not possible because they were “operationally unstable and are resulting in unsustainable financial losses”.

The company said it was “apprehensive” because of media reports that suggested the electric arc furnace plans “may be put in peril due to policy differences expressed by the Conservative and Labour parties, during the ongoing election period”.

Workers have voted in favour of strikes against Tata, but have so far held off in the hope that they can negotiate for more jobs to be kept, as well as better redundancy terms.

Alasdair McDiarmid, assistant general secretary of Community, a steelworkers’ union, said: “It would be wrong for Tata to make irreversible decisions before such a consequential election. Again, we urge the company to engage with Labour and the unions to consider alternatives to protect jobs.”

The Conservative government has pledged Tata £500m in subsidies, on top of the company’s own £750m investment, but the deal has not been officially completed.

Labour, which is well ahead in the polls before the general election on 4 July, is hoping that the company will wait and continue negotiations over options to keep more steel jobs in the UK.

Stephen Kinnock, who is running to return as Port Talbot’s local MP, said that Labour was opposed to “any deal that uses £500m of taxpayers’ money to make thousands of steelworkers redundant”.

Labour has pledged to spend £3bn helping the steel industry. That would include the £500m already promised – and potentially the same for Scunthorpe – but could also be extended to other technology to retain jobs as well as the UK’s ability to produce steel from iron ore.

One notable option would be a facility to produce direct reduced iron that could be fed into electric arc furnaces to make steel. A DRI plant could make near-zero-emissions steel if green hydrogen was used to strip out oxygen from iron ore.

However, Tata does not currently plan to add a costly DRI plant, so it would probably push a Labour government hard in negotiations for further subsidies.