Government scrambles to save British Steel as firm faces crisis within crisis

 

Analysis

Government scrambles to save British Steel as firm faces crisis within crisis

Jasper Jolly

Union leaders have welcomed moves towards public ownership but it is not an auspicious environment for nationalisation

 

Fri 11 Apr 2025 17.59 BST

https://www.theguardian.com/business/2025/apr/11/government-scrambles-to-save-british-steel-as-company-faces-crises-within-crises

 

Blast furnaces have been making steel in Britain for 300 years, ever since they helped start the Industrial Revolution. This weekend, parliament will sit for the first Saturday in decades as it tries to keep the last two furnaces running for a bit longer.

 

Keir Starmer has recalled MPs to discuss emergency powers to direct steel companies, including British Steel’s Scunthorpe steelworks, to “preserve capability and ensure public safety”. The move would be short of nationalisation, but it would give the government more influence on the steel industry than at any point since Margaret Thatcher.

 

The government is scrambling to save Scunthorpe after its Chinese owner, Jingye Steel Group, last month said it was considering closing it, with the likely loss of 2,700 jobs. Starmer and the business secretary, Jonathan Reynolds, hope to keep the plant running for the next few weeks while they work out the longer-term plan, with nationalisation one option.

 

British Steel is facing a crisis within a crisis: in the short term – the next week or so – it needs materials, including iron pellets and coking coal, or else it faces the prospect of the furnaces cooling beyond easy or affordable recovery. Customers would flee, making job losses inevitable.

 

People with knowledge of this week’s talks between the UK government and Jingye said it appeared that the government had run out of patience with the Chinese company’s negotiating. The government had offered to buy the raw materials to keep the blast furnaces running in the short term but that offer was not taken up. Parliament may be able to avert the short-term crisis on Saturday.

 

Union leaders representing steelworkers said they were relieved that the government appeared to be moving towards public ownership. Charlotte Brumpton-Childs, a former Scunthorpe steelworker and national officer for the GMB union, said nationalisation was “the only way to save the UK steel industry”, and that the ability to direct the company’s actions was “the first step in that process”.

 

Yet even nationalisation will not deliver Scunthorpe’s workers from the bigger questions over its long-term future. Jingye had rejected a £500m offer of support to switch to electric arc furnaces – to match aid given to Tata Steel at Port Talbot, south Wales – but Scunthorpe will need to make the switch if it is to have a future in a world of net zero carbon emissions.

 

The struggling Scunthorpe plant has passed between many owners since the privatisation of the UK steel industry in 1988. Its Indian former owner Tata Steel sold it to the private equity firm Greybull Capital in 2016, only for Greybull to exit in 2019. Jingye stepped in with a deal hurriedly agreed under Boris Johnson’s premiership to buy the plant out of insolvency.

 

Jingye’s timing appears to have been unfortunate. Since it took over, British Steel has lost a cumulative £350m, according to accounts up to the end of 2023. The company was not helped by the turbulence of the coronavirus crisis and a global glut as the vast Chinese industry, producer of more than half the world’s steel, tried to find buyers.

 

That was before Donald Trump’s tariffs added to the turmoil, making exports to the US more expensive and threatening a global recession.

 

It is not an auspicious environment for the Labour government to undertake a major nationalisation. So the steel industry has been reassured that Labour has so far appeared committed to a manifesto pledge to invest £2.5bn in the sector, which has survived deep cuts to spending on international aid and benefits.

 

That commitment will be tested to its limit if Labour decides to take ownership of a steelworks that is losing money and needs hundreds of millions of pounds of investment. But the chance to guide a nationalised UK steel industry into the decarbonisation revolution will also have its attractions.