UK government on verge of full nationalisation of British Steel
Talks with Chinese owner Jingye continue while losses mount
The UK government is on the verge of fully nationalising British Steel, almost a year on from using emergency legislation to take control of the business, three people close to the situation said.
Last year a special measures bill granted the government emergency powers to take control of the business and safeguard jobs amid fears that Chinese owner Jingye was running down the site after halting coke imports.
But British Steel is heavily lossmaking and the government spent £377mn between April and the end of January to keep it afloat. The National Audit Office has warned that this could hit £615mn by June and £1.5bn by 2028 if current spending continues.
Jingye still has economic control of British Steel, meaning the government is legally unable to sell all or part of the business or make decisions about its strategy. One person familiar with the situation said that nationalisation was a “necessary step” for British Steel’s future.
The government is now considering how to use legislation to take legal control of the business. The person familiar with the situation said the government’s recent move to designate steel as a “strategic national asset” could pave the way for the government to use national security laws to force through nationalisation.
Jingye rejected a £100mn offer for British Steel from the government last month and had originally demanded more than £1bn in compensation.
A senior UK government official said negotiations with Jingye were still active and taking place in good faith: “There is clearly a defined timeline, they cannot go on forever.” British Steel declined to comment.
A government spokesperson said: “We have been clear that safeguarding UK steelmaking is our priority. We continue to engage with the owner to find a solution that protects workers, production and the national interest, and we will not comment further while discussions are ongoing.”
Gareth Stace, director-general at industry group UK Steel, said the industry would “strongly welcome” the full nationalisation of British Steel. “This would provide vital certainty for the workforce, the company’s customers and the wider supply chain at a critical moment.”
British Steel’s Scunthorpe site is home to Britain’s last two operating blast furnaces and produces 95 per cent of the steel used on UK rail tracks. The government favours a shift to greener electric arc furnaces but this transition would cost thousands of jobs.
Britain’s other major steelmaker, Tata Steel, has announced plans to shift to electric arc furnaces at its Port Talbot site in Wales but at the cost of £1.25bn and thousands of jobs. The government has already provided a £500mn grant to Tata Steel to fund the transition as part of a wider £2.5bn package of support for the UK steel sector.
Against a volatile backdrop of US tariffs and the UK’s high energy costs, the government this month announced its much delayed steel strategy, focused on reworking trade quotas designed to protect steelmakers from a glut of Chinese imports.
Michael Flacks, a Manchester-born turnaround investor, has expressed an interest in acquiring British Steel and combining it with other European steel operations. Bankers have also been sounding out interest from other strategic partners, but people close to the situation said that it was a moot point until the government had the legal ability to actually sell the business.