Steve Barnes, co-owner of the Lucky Tuppence sweetshop on Scunthorpe’s high street, has experienced the decline of the UK’s steel industry first-hand: he was made redundant in 1981, when Margaret Thatcher’s government cut thousands of jobs. Barnes said the lack of investment in steel in the decades that followed has felt like “a way of punching the north”.
In between weighing lollipops and chocolate buttons from the array of jars that line his shelves, he is now contemplating the latest blow to the town: British Steel’s plans to axe more than 2,000 jobs in Scunthorpe, out of a workforce of about 3,800, in a shift to greener technology.
The steel industry must decarbonise if the UK is to hit its target of net zero additions of carbon to the atmosphere by 2050. Scunthorpe’s sister plant, the Port Talbot steelworks in south Wales, is the UK’s biggest single emitter, producing 5.7m tonnes of carbon last year, while the north Lincolnshire site is the third biggest, producing 4m tonnes, or about 1% of the UK’s annual total, according to government data.
The outlines of the UK industry’s future have become clearer over the past month. Last week, Chinese-owned British Steel announced it planned to close Scunthorpe’s blast furnaces in favour of electric arc furnaces, which it hopes to build by late 2025 (although unions suggest that could be too ambitious, given that the company is yet to start ordering the components). One furnace will be in Scunthorpe while another will be in Teesside, to which steelmaking will return for the first time since 2015.
Tata Steel, Port Talbot’s Indian owner, is considering a similar plan to close its two furnaces as soon as March, with 3,000 job losses. Union leaders fear as many as 2,500 redundancies at Scunthorpe, although there are a few years left before British Steel plans to let its two operating blast furnaces cool.
Earlier this month, Tata went as far as drawing up detailed plans for the redundancies, but pulled the announcement at the last minute. That has offered workers a chance to argue their case again, although unions have had little sign that Tata will change its mind.
The switch to lower-maintenance electric arc furnaces will cost jobs, the latest chapter in decades of decline for the UK steel industry. It could prove to be a historic turning point for the British economy, potentially taking away the ability to mass-produce steel from iron ore and coal for the first time since the Industrial Revolution.
‘One thing after another’
Scunthorpe’s modern steel industry started with iron ore discoveries in the 1850s, and the town’s fortunes rose as the steel industry become a mighty economic presence, producing more than 25m tonnes a year by the 1960s. Yet as other countries caught up in the industrialisation race, and China powered ahead, the UK’s steel industry declined amid underinvestment. It has been “one thing after another” in recent years, grumbles a man running a fast food stand in the town centre.
The plant has passed down through a series of owners for decades. It was once part of the Anglo-Dutch steelmaker Corus, which Tata (also the owner of Jaguar Land Rover) bought in 2007 for a top-of-the-market £6.2bn, just before the financial crisis. Tata offloaded Scunthorpe to the private equity firm Greybull in 2019 for a nominal sum, which in turn abandoned the company to liquidation after three years. Chinese steelmaker Jingye eventually stepped in to buy the plant in March 2020 – after the taxpayer spent more than £600m propping it up.
Jingye’s purchase has not, so far, been a success. British Steel’s accounts for 2021 are almost a year overdue, but it lost £140m in 2020. The unions say that Jingye is yet to meet many of the investment pledges it made when it bought the plant. A British Steel spokesperson said Jingye has invested £330m.
The switch to electric arc furnaces will need investment on another level: British Steel said on Monday it would cost £1.25bn in Scunthorpe and Teesside. The company is thought to be negotiating for £500m in government support to match that promised to Tata.
Blast furnaces use coal to make iron that then has carbon removed to produce steel. That process produces unavoidable carbon emissions. On the other hand, electric arc furnaces can use electricity – ideally, generated from renewable sources – to melt down scrap steel or iron.
British Steel had been considering keeping one blast furnace open and storing the carbon emissions in empty oilwells under the North Sea, but on Monday it said that option was “not viable” for its steel. It is understood that the local carbon capture project will be able to continue without the involvement of the steelworks.
Unlike blast furnaces, electric arc furnaces are not capable of making iron from iron ore. Chris McDonald, chief executive of the Materials Processing Institute, which runs its own experimental electric arc furnace, said the British Steel and Tata Steel announcements were “necessary but not sufficient”.
“Whatever technology we end up with, the electric arc furnace will be at the heart of it,” he said. “What’s missing is any iron ore steelmaking.”
McDonald, who has been selected as a Labour candidate at the next election, said the government should invest further to build a direct reduced iron (DRI) plant that could use methane or, later, zero-carbon hydrogen to make iron without adding to the climate crisis.
The scramble for scrap
There could be other gaps in the plans. At Port Talbot, electric arc furnaces will be unable to make steel for cars such as Nissan’s Leaf, built in Sunderland with Welsh steel, because nitrogen from the air gets in, creating blemishes. Arc furnaces were capable of making all the products currently made at Scunthorpe, including the rails on which the UK’s trains run, British Steel said.
Both companies need to be able to source scrap metal at the correct grade. Some steel executives argue electric arc furnaces make sense because the UK exports 10m tonnes of scrap steel a year, more than the 7m tonnes it makes. McDonald said this argument ignored the quality of the steel; he suggests only 1m tonnes would be the highest-quality, most-sought-after grades.
In a tired office block that still has traces of the works’ past under public ownership, Paul McBean of the Community union agreed, saying only about 13% of the UK’s scrap would be of the right grade. “The whole of Europe is going to be chasing that 13%,” he said, arguing that the previous approach of keeping a blast furnace open would avoid possible reliance on imports of higher-quality scrap.
British Steel said: “Detailed research shows we would be able to source the volumes and quality of material we would require.”
National security
Scunthorpe has its “four queens” – the blast furnaces named after English monarchs Mary, Bess, Anne and Victoria – that are visible for miles around in north Lincolnshire, although just Anne and Victoria are currently in operation.
What happens to them may have a bearing on national politics. In 2019, Holly Mumby-Croft became Scunthorpe’s first Conservative MP since 1983 – a key brick in the “red wall” – when Boris Johnson’s pro-Brexit wave helped win seats in areas that voted leave in the 2016 EU referendum. (North Lincolnshire, which contains Scunthorpe, voted two-thirds in favour of Brexit.)
The threat of thousands of job losses has put Mumby-Croft in a tricky position. She is calling for major intervention from ministers to save the blast furnaces. She wants any government support for British Steel to be accompanied by guarantees that they will remain burning for several years and that jobs will be retained.
Sitting in a cafe across the road from the steelworks, she said “if we’re going to use it, we might as well make it”. “I don’t think we should be one of the only countries in the G20 who can’t make our own steel”.
Mumby-Croft will probably be up against her predecessor, Nic Dakin, at a general election as soon as next year. Dakin has been reselected to fight the seat, and he is strongly critical of the Conservative government’s “sticking-plaster politics”. A loss of 2,000 jobs in Scunthorpe would be a “significant challenge to the local economy”, taking out relatively high-paying jobs, Dakin said at a cafe with a “Save our steel” poster in its window.
Labour has said it will invest £3bn in the steel industry if elected. It is not thought to have drawn up detailed plans, although references to hydrogen in one official document suggest that DRI could be an option. Conservative government investment in the sector would come to £1bn if both Tata and British Steel receive £500m.
Despite political differences, Dakin, Mumby-Croft and the unions all agree they do not want the UK to lose the ability to produce its own liquid steel from iron ore. The global chaos in supply chains from the pandemic and the Ukraine war have made some governments think more about resilience of key materials and parts, and Russia is the dominant global supplier of iron.
Charlotte Brumpton-Childs, national officer for steel at the GMB union and a descendant of several generations of Scunthorpe steelworkers, said: “If we go to war with Russia, they’re not going to send us their pig iron, are they?”
The government “fundamentally don’t understand the industry and the need for the ability to make primary steel”, she added.
That idea makes some in defence circles nervous: a Royal United Services Institute report this year worried that becoming “the biggest economy by far worldwide to have no significant domestic steelmaking capacity” could harm security and economic resilience.
Whatever the implications for the UK’s strategic interests, another large round of job losses would devastate Scunthorpe, which contains several wards among the 10% most deprived in Britain. “The steelworks is massive in Scunthorpe’s economy, but clearly not as much as it was in the 1980s,” said Barnes, the sweetshop owner. But “the impact it has on Scunthorpe when something like this happens is as much psychological as it is anything else.”
