British Steel is set to be fully nationalised to ensure China cannot turn off the country’s ability to produce virgin steel, the government pledged today.
The company, owning the UK’s two last remaining blast furnaces where primary steel – vital for defence and national security needs - can be produced, was taken under state control via emergency legislation in April last year.
The government said subsequent discussions with British Steel’s Chinese owner Jingye ‘to find a pragmatic and realistic solution for the business on acceptable terms’ have not reached agreement.
Now a new bill will be introduced in Parliament this week which ‘would give it the option to nationalise British Steel, subject to a public interest test being met’.
But full details of the bill’s timescale, any compensation payable to Jingye for the loss of their asset – or future strategy for the blast furnaces, at Scunthorpe, North Lincolnshire, which are also the rail network’s only supplier - have yet to be revealed.
In the long-term, the government hopes to convert the site using green steelmaking techniques but the cost of decommissioning the existing plant will also have to be covered.
The absence of critical information in the government’s announcement comes amid spiralling losses at Scunthorpe which have almost doubled to £1.3m a day under public ownership.
It led to criticism from the Tories who accused Labour of ‘lurching from chaos to chaos with no credible long-term plan’.
British Steel's Scunthorpe steelworks is home to the UK's last two blast furnaces
They also said China should bear some responsibility for any decommissioning costs.
Department for Business and Trade officials say it has ‘not been possible to agree a commercial sale with the current owner, and government does not believe an agreement could be reached which would deliver acceptable value for money for taxpayers'.
The public interest test ‘considers factors including national security, maintaining critical national infrastructure and supporting the economy’, they added.
Prime Minister Sir Keir Starmer said: ‘Steel is strategically important to our economy and our national resilience.
‘That’s why we acted last year to avoid a sudden halt to production at Scunthorpe, protecting workers and the community that depend on the site, and why we’re now bringing forward legislation to give us options to protect Britain’s steelmaking capability.’
In response, Andrew Griffith MP, shadow Business and Trade secretary, said: ‘This Government has lurched from chaos to chaos with no credible long-term plan for Scunthorpe. He (Starmer) sounds like a broken record.
‘The taxpayer has already footed the bill for hundreds of millions in cash. Now, a year after the Government’s botched part-nationalisation, the Prime Minister wants taxpayers to spend even more and take on billions worth of China’s decommissioning costs to try and save his job.
‘This weak PM dithered over Chinese ownership: now he’s too weak to come up with a long term plan for British steelmaking.’
Britain's ability to produce its own virgin steel is seen as vital to the country's national security
But trade body UK Steel said it ‘strongly welcomed’ the announcement, calling it a ‘decisive step to secure the future of a strategically vital part of the steel supply chain’.
UK Steel’s director general Gareth Stace said the announcement ‘provides vital certainty for the workforce, the company’s customers and the wider supply chain at a critical moment’.
He said: ‘Steel is a foundation industry and a recognised strategic national asset. Maintaining domestic production capability for British Steel’s products is essential not only for economic growth but also for our national security and resilience.’
Mr Stace said there now needs to be a ‘clear and credible long-term plan for British Steel’, a ‘detailed investment strategy supporting a ‘managed transition’ to low-carbon steelmaking and ‘broader action to tackle sky-high energy prices in the UK’.
The legislation will be detailed in the King’s speech on Wednesday and will be the first time British Steel will be back in full public ownership since it was privatised in 1988.
It was temporarily renationalised in 2019 but under the control of the Official Receiver prior to Jingye taking over.
Charlotte Brumpton-Childs, GMB National Secretary, said: ‘Unions have long known Jingye will not negotiate in good faith.
‘British Steel is a nationally-strategic asset; it is right the government does everything in its power to secure its long-term future.’
In March, the National Audit Office highlighted how £377m was spent in the nine months subsidising the plant from April last year to January.
The continued cost to taxpayers of bailing out the company, which employs over 4,000 staff, was expected to reach £615m by June and could reach £1.5bn by 2028 if there is no change, the NAO said.
In March, the government published its long-awaited £2.5bn Steel Strategy, setting out an aspiration to move towards green steelmaking, meaning closure of the blast furnaces in the long-term.
It commits to ‘electric arc furnaces (EAF) as the future of British steelmaking, continuing the shift from blast furnaces to cleaner, EAF-based production using recycled scrap to support net zero’.