Prime minister Sir Keir Starmer and chancellor Rachel Reeves view the UK steel industry as having “huge strategic importance”, as the government mulls whether to nationalise British Steel.
Starmer yesterday (8 April) said in Parliament that his government would do “everything we can to ensure there’s a bright future” for the Chinese-owned company’s at-risk site in Scunthorpe.
British Steel, which employs 3,500 people across its three main UK sites, is currently short on the raw materials needed to keep two blast furnaces active in Scunthorpe.
“The closure of the Scunthorpe facility, which supplies 95% of the UK’s rail tracks, would put 2,700 jobs at risk and leave the UK without the ability to make steel from scratch”, the FT reports.
All options on table
Government talks with Jingye Group – British Steel’s owners – are ongoing, with business and trade secretary Jonathan Reynolds due to meet executives from the Chinese firm today (9 April).
Jingye is expecting a £1bn injection from the UK government, according to the BBC. So far, this has only been £500m, which would go towards transitioning to a greener form of production through the introduction of a new electric arc furnace.
Business minister Sarah Jones said in Parliament this week that the government’s preference is that “a commercial solution” is reached, but that “no options are off the table”.
Priority sector
Reform UK MPs Richard Tice and Nigel Farage are among those calling for the government to nationalise the company.
Whitehall sources have told the Guardian that both Reeves and Starmer view steel as being of “huge strategic importance” and that nationalisation was being considered as an option.
Reeves met with union leaders involved in the talks over the weekend to reassure them of the government’s support.
Tariff threat
The materials shortage also comes at a time of strain in the steel industry, following the imposition of 25% tariffs on steel exports to the US by president Donald Trump’s administration.
The UK currently exports around 200,000 tonnes of steel per year to the US, worth over £400m, according to UK Steel.
"The imposition of US tariffs on UK steel would be a devastating blow to our industry,” said UK Steel director general Gareth Stace.
“The US is our second largest export market after the EU. At a time of shrinking demand and high costs, rising protectionism globally, particularly in the US, will stifle our exports and damage over £400m worth of the steel sector’s contribution to the UK’s balance of trade.”
Environmental challenge
Stace added that new environmental laws in the EU and UK are also a risk for the industry.
The EU’s carbon border adjustment mechanism (CBAM) is already in the process of being introduced. This levy applies to various commodities, including steel, and is applied when production processes are more carbon-intensive than those that are taking place within the bloc.
The UK is also looking to introduce its own such mechanism, but until it does, the UK is at risk of becoming a dumping ground due to its less stringent current regulations.
Stace that this, along with the new US tariffs, “reinforced the urgent need for watertight UK trade measures” to protect the industry.
“Accelerating the UK’s CBAM to 2026 would provide an additional layer of protection against unfairly priced steel. The UK government must act decisively to shield our domestic industry from the fallout of rising global protectionism."
Steel strategy key
Paul Brooks, manufacturing lead at the Chartered Institute of Export & International Trade, said that the situation at British Steel’s Scunthorpe site highlighted the importance of the UK’s upcoming “plan for steel” and its wider industrial and trade strategies.
The government conducted a public consultation into its steel strategy earlier this year.
Brooks added:
“The government has said steel is strategically important for the UK, but there’s no doubt that a coherent plan is needed on how it will look to protect it from rising volatility in the global marketplace.
“The upcoming plan for steel needs to align with and complement the wider industrial and trade strategies that the Chartered Institute has been consulting with government about on behalf of its members.
“Both plans are due out soon, and time is now of the essence due to the rapid pace at which trade is changing, due to Trump’s trade war.”
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