Steel Crisis on the Horizon: Will the UK Government Save British Steel?

The UK government is set to intervene as British Steel’s Scunthorpe plant faces imminent closure, threatening 2,700 jobs and the nation’s only source of virgin steel. This critical plant, employing the majority of the company’s workforce, plays a vital role in major construction projects.

Established in 2016 after Tata Steel sold its long products division to Greybull Capital, this operation has undergone a tumultuous existence, including a takeover by the Chinese firm Jingye in 2020. Despite a significant £1.2 billion investment, the plant is reportedly losing £700,000 daily and has initiated a 45-day consultation on job cuts due to unsustainable operations amidst challenging market conditions.

The current crisis is exacerbated by dwindling supplies of coking coal and iron pellets, essential for operating the two large blast furnaces needed to produce virgin steel. If operations cease, restarting the furnaces can be complex and costly. The market is also impacted by international competition and a 25% tariff imposed by the US on imported steel, contributing to the overall decline of UK steel production.

In response to this urgent situation, the government has summoned MPs for an emergency session to discuss potential legislative frameworks for maintaining operations at the Scunthorpe site. They aim to fast-track laws that could allow government intervention, including ensuring that employees affected by any job cuts could be reinstated.

Union representatives express serious concerns about the future of steelmaking in the UK, urging the government to consider nationalization as a way to preserve jobs and production. Meanwhile, the broader UK steel industry consists of 1,160 businesses, directly supporting 40,000 others, and produced 5.6 million tonnes of crude steel in 2023, contributing £2.3 billion to the economy. Yet, compared to global producers like China, the UK’s output remains marginal.