Source: Sharecast
Around 2,500 jobs will still be lost, however.
Announcing the deal to Parliament, business and trade secretary Jonathan Reynolds said the deal would "give hope for the future of steel making in south Wales".
But he apologised that more jobs would not be saved. "While this deal is much improved, I acknowledge very much it falls short of what would be my ideal," he told the Commons.
Port Talbot is the UK’s largest steelworks and the region’s biggest employer. The sprawling site has two ageing coal-powered blast furnaces, and until recently was the UK’s largest single carbon emitter.
Owner Tata Steel - part of Indian conglomerate Tata Group - has argued that its plans to switch to greener forms of steelmaking will help reverse a decade of losses and make the business more sustainable.
Last September, the then Conservative government agreed to pay £500m towards the redevelopment, which includes the installation of an electric arc furnace, which is less labour intensive. Tata will invest a further £750m.
The new Labour government has backed the deal, but said it had improved redundancy terms, including a minimum voluntary redundancy payout of £15,000 for full-time workers, and more support for retraining.
It can also claw back the £500m investment should Tata Steel not fulfil its commitments, including a pledge to retain 5,000 jobs across its UK business post transformation. Tata currently employs around 8,000 people in the UK.
Reynolds also unveiled £2.5bn government investment programme to rebuild the wider steel industry and help it decarbonise. Further details are expected in the spring.
Reynolds said: "Steel is fundamental to the UK’s economy, sovereignty and communities, but previous government inaction has blighted the steelmaking industry.
"That’s why this government is taking strong action through a new deal and strategy, which will revise the industry’s stagnation a set out a long-term vision for a bright and sustainable future."
Unite welcomed the deal. General secretary Sharon Graham said: "The two-stage government commitment to provide serious funding for steel in south Wales is vital for local communities and the long-term future of the steel industry.
"The last government was, quite frankly, asleep at the wheel."
However, rival unions Community and GMB said: "This deal is not something to celebrate but, with improvements the unions and the government have negotiated, it is better than the devastating plan announced in September 2023."
"Clearly this is not where we wanted to be, and we know that a better plan was available." Community and GMB wanted Tata Steel to consider keeping one of the blast furnaces open until 2032.