Britain in talks with Tata Steel over $630 million aid package, Sky News reports

LONDON, Sept 2 (Reuters) - The British government is in advanced talks with Tata Steel, the countrys biggest steel producer, to provide 500 million pounds ($629 million) of funding to help secure the long-term future of a key part of its steel industry, Sky News reported on Saturday.

The funding would be pumped into the Port Talbot steelworks in south Wales alongside 700 million pounds ($881 million) from Tata Steels Indian parent company and a commitment from the company to build electric arc furnaces, Sky News said.

British officials have been talking to the countrys two biggest steelmakers, Tata and British Steel, for months about state support to help fund the transition to the more environmentally-friendly method of producing steel from electric arc furnaces.

But the talks have faced difficulties over potential job losses because the new style furnaces require fewer staff.

About 8,000 people are employed by Tata Steel in Britain and Sky News cited industry sources as saying the company had warned that it may need to make as many as 3,000 redundancies in the future.

Tata Steel has in the past warned that without government support, it will need to consider closing its sites.

The company did not immediately respond to a Reuters request for comment, while a spokesperson for the governments Department for Business and Trade said it did not comment on ongoing negotiations.

($1 = 0.7944 pounds)