Ministers hand EY contract to scrutinise Tata Steel funding request

Ministers have awarded a seven-figure contract to scrutinise Tata Steel's request for hundreds of millions of pounds of extra taxpayer funding amid doubts over the timetable for constructing a new electric arc furnace (EAF) in South Wales.

Sky News has learnt that the Department for Business, Innovation, Science and Trade has asked EY to lead work on the project, which comes amid a renewed crisis for Britain's steel industry.

EY, which has been paid millions of pounds by the government for its work on the steel industry in the last few years, is understood to be being paid £1m for the latest work, according to tender documents cited by Bidfinder, which tracks government spending with consultants.

The contract extension, awarded during the summer, was designed "to support HMG's assessment of Tata Steel UK's request for additional Government support for the Port Talbot Electric Arc Furnace transformation project", Bidfinder said.

Sky News revealed last month that Tata Steel was seeking fresh government funding for the transformation of Port Talbot - with the request understood to be worth hundreds of millions of pounds.

The ask is in addition to a £500m taxpayer grant awarded to Tata Steel in 2023 to build a new EAF at the site, one of the most important in British manufacturing.

That government aid formed part of a £1.25bn investment in the site which was supposed to have the new EAF operational by early 2028 - within three years of construction getting underway.

The plan was aimed at preserving 5,000 steelmaking jobs across the UK, although 2,500 roles have already been lost as part of the transition.

The last of Port Talbot's blast furnaces closed in 2024.

However, delays to the grid connection timetable have left Tata Steel to conclude that the new EAF will now not be up and running until late 2028 or early 2029.

The company is said to have calculated that rising costs associated with the project, as well as foregone sales caused by the delay to the EAF, would cause a significant escalation in its overall cost.

The precise sum of additional funding that Tata Steel is now seeking from Whitehall was unclear this weekend, although industry sources said it was likely to run to hundreds of millions of pounds.

Jonathan Reynolds, the business secretary, is being kept abreast of the developments, they added.

Tata Steel has warned for years about the viability of Port Talbot, with repeated threats of closure hanging over the plant during the last decade.

The company has been hammered by a glut of cheap steel arriving in the UK, with one of its senior executives warning late last year that Britain had become "an unfairly priced dumping ground for cheap imports".

Earlier this year, it was reported that the company was considering mothballing its UK steel mills amid rising losses.

Union leaders said over the summer that Tata Steel's Llanwern plant in Newport, South Wales, was particularly at risk from larger-than-expected quotas allotted to India by the government alongside the free trade agreement struck by the two countries earlier this year.

In the wake of Sky News's report last month on the funding request to the government, Tata Steel bosses confirmed to Indian journalists that discussions were underway.

The latest talks come amid a wider crisis which has seen Britain's biggest steelmakers put on life support by the government.

British Steel, the second-biggest player in the industry, was nationalised during the summer using legislation passed by parliament after threats by the company's previous Chinese owner, Jingye Group, to close its blast furnaces at Scunthorpe.

Last month, however, the government was criticised by MPs for failing to develop a "credible plan" for the company's future financial sustainability.

British Steel is costing taxpayers £1.3m a day to keep afloat.

Mr Reynolds also said last month that SSUK, the UK's third-biggest steel producer, was being prepared for a move into government ownership following a failed sale process.

A spokesman for the government said that any discussions with a private company "would be commercially sensitive", and that it would not comment.

(c) Sky News 2026: Ministers hand EY contract to scrutinise Tata Steel funding request