It may be too late to save British Steel
The UK parliament is being recalled for an emergency debate tomorrow as ministers fight to save Britain’s only surviving steel-making plant from imminent closure.
According to Downing Street, ministers are set to debate an emergency law that would give them immediate powers to control British Steel's plant in Scunthorpe to ensure it has enough raw materials to keep going. While the move stops short of fully nationalising the company for now, Downing Street added that “all options remain on the table”.
The crisis comes after the misleadingly-named British Steel, a Chinese-owned company, announced that it’s on the brink of shutdown - a shutdown that would end centuries of steel-making in Britain, with the loss of 2,700 jobs.
Its Chinese owner, Jingye, which says that its blast furnaces are "no longer financially sustainable”, has been in a standoff with the UK government over who will pay for the plant’s costly transition to electric arcs.
Jingye insists it needs more generous help from ministers than the £500m currently on offer if it is to manage the estimated £2bn cost of remaking the plant in Scunthorpe to produce “green” steel, which emits less CO2 than the current blast furnaces.
Why is the potential closure of Britain’s last steel-making plant being treated as a national emergency?
Because a domestic steel industry is deemed a matter of national security.
Steel is tied to defence. It is a critical component of a whole host of military equipment, from warships to helicopters to ammunition. Steel is vital too because it’s a foundational industry that supports countless other sectors including construction, housing, nuclear energy and the automotive industry.
Nervousness about Britain being left entirely reliant on foreign imports is thus unsurprising.
And, as Maggie Pagano wrote recently in Reaction, many are rightly questioning too “why the UK ever allowed such a vital strategic asset to be foreign-owned, leaving taxpayers at the mercy of international conglomerates”.
But is bringing British Steel back into public ownership the solution? Or is the UK’s steel industry already doomed?
In the early 1970s, the UK was the second-largest steel producer in Europe. Since then, no other country apart from Venezuela has seen its steel production fall faster than Britain. The UK currently produces just one per cent of global output.
The sobering reality is that the UK’s domestic steel-making has already shrunk almost to the point of irrelevance.
And, as Maggie also points out, it is an illusion to think we have an independent steel industry as it is. What is left of the industry is already reliant on imports of iron ore and coal, from countries such as Brazil.
All of which means the government faces a tricky decision. How far should it go to fight to save an undeniably vital industry? Or should it simply accept that Britain’s days as a proud steel-producing nation are already over?
If it opts for the nationalisation route, then it must, crucially, address the underlying cause of British Steel’s crisis.
While Trump’s tariffs on the metal sectors have dealt another blow to an industry already facing an uncertain future, they are not the reason why Jingye, which bought British Steel in 2020, has been suffering financial losses of around £700,000 a day.
The real problem is that steel production and processing is incredibly energy-intensive and the industry is being crippled by high electricity prices.
According to industry body UK Steel, power costs can represent up to 180% of steel producers’ Gross Value Added (GVA) in the UK. And, from 2023-2024, UK steelmakers’ energy costs (per megawatt hour) were almost twice that of their German and French competitors.
Government subsidies for British Steel are just a sticking plaster. The real problem that needs to be tackled is the cost of energy.
The government also faces the politically fraught task of reckoning with the role that green energy policies have played in increasing said costs. Steel plays an important role in Britain’s transition to a low-carbon economy since it’s a vital component in wind turbines and EVs. Yet, ironically, what is left of Britain’s steel industry is on the brink of collapse in large part due to the challenge of transitioning to a greener form of production that brings with it higher costs.
Caitlin Allen
Deputy Editor
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also Brexit was a disaster for the UK steel industry.
If the current geopolitical and economic uncertainties do not provide a sufficient case for greater resource independence and therefore the abandonment of an essentially performative but highly damaging set of “net zero” policies, the consequences of which have been studiously ignored, then nothing will.