Who owns British Steel?
The company has been through several owners since it was privatised in the 1980s. The latest, Jingye, was welcomed by then prime minister Boris Johnson in 2019 after private equity firm Greybull had run the firm for three years.
A glut of steel on international markets and the investment needed to upgrade the works to run on renewable energy has convinced the Chinese firm that Scunthorpe is not economically viable.
Why has the government stepped in to rescue it?
Ministers wanted to develop an industrial strategy – that includes domestically produced steel – before allocating any cash to individual sectors. But the crisis at British Steel’s Scunthorpe plant brought forward a decision about what kind of steel industry the UK needs.
The plant, which is the last remaining maker of mass-produced virgin steel in England and makes a range of products, from girders for the building sector to train tracks, needs raw materials within the next fortnight, including iron pellets and coking coal, or else it faces the prospect of the furnaces cooling to a point where it is neither easy nor cost-effective to bring them back.
The new legislation, approved by parliament on Saturday, will prevent mass redundancies and manage a transition from blast-furnace-produced steel to electric arc furnaces, which can run on renewable energy.
What is the rescue plan?
Jonathan Reynolds, the business secretary, has been given emergency powers that allow him to order the company to buy the raw materials it needs. The government will pay the bill for running costs. Jingye has said it is losing about £700,000 a day.
In its manifesto, Labour said it would commit £2.5bn to turning around the steel industry. This initial rescue operation will begin to eat into that allocation.
What about nationalisation?
Ministers are expected to conclude they have no option but to nationalise the plant if they are to keep it going and manage the transition to low-carbon steelmaking. A proposal to take the works into public ownership is expected to be agreed by Keir Starmer and Rachel Reeves this month.
In 2021, the government nationalised steelmaker Sheffield Forgemasters, which mostly makes steel casings for the defence industry, and pledged to invest £400m over 10 years.
However, blast furnaces owned by Tata Steel were allowed to close at Port Talbot in south Wales last year. Staff were made redundant and £500m was provided to the Indian-based firm to make the £1bn transition to electric arc furnaces. Jingye wanted more than the £500m to invest in modern furnaces.
Does the UK need to make virgin steel?
Virgin steel is made from iron ore using extreme heat from coal-fired blast furnaces to break it down. It is the strongest steel and can be used in all steel products, whereas steel made in electric furnaces is not strong enough for some uses.
There is plenty of virgin steel available on the continent that could be imported, which could save the cash for other much-needed projects. British Steel has complained that it pays 50% more for its electricity than European rivals, which include private firms ArcelorMittal and ThyssenKrupp. Industrial users of energy in the UK pay for electricity at a rate governed by the cost of gas, which has soared in recent years. But Keir Starmer has asked himself whether Labour can afford not to reinvent British Steel – and make virgin steel – in a world of changing political alliances and protectionist barriers to trade.
Can the government afford to turn around British steel?
Starmer is betting that Labour’s broader public investment agenda will generate enough housebuilding and construction of commercial offices and railways to soak up everything Scunthorpe and Port Talbot can make and more.
