By all accounts, British Steel is terminally ill and demands resuscitation, failing which its demise can be guaranteed. Its current owner, Jingye Group, a Chinese steelmaker and multi-national conglomerate that was founded by Li Ganpo in Hebei Province in 1990, claims to be losing £700,000 a day just to keep its remaining blast furnaces open. The company has rejected an offer of £500 million from the UK government to help fund a transition from its two coal-powered and energy-intensive blast furnaces to two greener electric arc furnaces, which are more energy efficient and do not require virgin resources, having invested more than £1.2 billion since takeover in March 2020 just to maintain operations. The critical situation has led British Steel to announce a consultation, on 27 March 2025, regarding the proposed closure of its two blast furnaces and a reduction of steel rolling mill capacity in Scunthorpe in north Lincolnshire.
Scunthorpe, where steel manufacturing began in 1890, hosts the last remaining primary steelmaking facility in the UK. The town is reported to be turning into a “ghost town”, just as the blast furnaces are expected to shut down by mid-May 2025 from a lack of raw materials, including coking coal and iron ore. British Steel is reported to employ as many as 2,700 people at Scunthorpe, and the steel industry is responsible for many additional jobs in steel processing, the local services sector, and throughout supply chains. If British Steel fails to survive, the UK will become the only G7 country unable to make virgin steel, or BOS (basic oxygen steelmaking) steel, which is made from iron ore in blast furnaces, as opposed to recycled steel, which is made from scrap materials in electrical arc furnaces. Tata Steel closed the blast furnaces at its Port Talbot plant in South Wales in 2024- to be replaced with an electric arc furnace, funded by an investment of £1.25 billion, including a UK Government grant worth up to £500 million. The South Wales Industrial Transition from Carbon Hub project will simultaneously redevelop a four-acre site in Port Talbot to support a rejuvenated steel industry.
Steel production in the UK is facing numerous challenges. Declining crude steel output over several decades has led to numerous plant closures and to high direct job losses. Consett, Corby, Ravenscraig, Redcar, and Shotton were among the casualties of later steel plant closures, with devastating effects on local economies. The decline of the steel industry has been accelerated by the ongoing transition to electric arc steelmaking, high industrial electricity prices, high labour costs, a glut in overseas steel production, an oversupply of cheaper Chinese imports, and, most recently, the imposition of 25% tariffs on all steel imports in the US.
The UK was once a global leader in steel making, being the world’s fifth largest steel producer in the late 1960s. The Iron and Steel Act of March 1967 nationalised 90% of British steel making, and the British Steel Corporation (BSC) was formed in July that year from a merger of the 14 largest steel makers in the UK. Steel production was thereafter concentrated in South Wales, Sheffield, Scunthorpe, Teesside, and Scotland. Several loss-making steel plants were closed from the mid-1970s onwards. A trimmed-down BSC was reprivatised by the British Steel Act in 1988, with the formation of British Steel plc, which finally returned to profit in 1994. A merger with Dutch steel producer Koninklijke Hoogovens to form the Corus Group in October 1999 was followed by the purchase of Corus by Tata Steel in January 2007. By 2016, the UK was reduced to the status of 21st largest producer of steel in the world. Tata Steel sold its Scunthorpe plant in 2016 to a private investment company, Greybull Capital, for £1, which then rebranded as British Steel, while Port Talbot, the largest steelworks in Britain, was taken over by an entity formed by the merger of German steelmaker ThyssenKrupp with Tata Steel in 2018. British Steel meanwhile went into compulsory liquidation in May 2019, only to be taken over by Jingye in March 2020. It is worth noting that re-nationalisation is currently being considered as a potential solution to keep the steel industry afloat, notably even by politicians belonging to the pro-private enterprise Reform Party.
Steel is crucial for the UK government’s economic growth agenda, as it supports manufacturing (machinery, technological equipment, household appliances, military hardware), vehicle production (cars, trains, ships, planes), transport infrastructure projects, the construction industry, and green infrastructure (solar panels, wind turbines). Unfortunately, the British model of steel production has proven to be flawed. Foreign ownership of the steel industry, with little vested interest in developing local economies and lacking a long-term growth strategy, has been propped up by taxpayer-funded state subsidies, while the decarbonisation of steelmaking to establish low-emissions steel making and meet net-zero targets has further raised costs of production. After years of benign neglect by the government and a failure to modernise the sector, the government has committed up to £2.5 billion, having launched a Plan for Steel Consultation, from 16 February to 31 March 2025, to “inform development of the Steel Strategy.” The government’s Steel Strategy aims to “deliver long-term growth” and attract new private investment in the steel industry. The government’s response, although welcome, can be considered, at best, a matter of too little and too late when it comes to restoring the competitiveness of British steel making in both domestic and global markets. Even though nationalisation may not prove to be a panacea for the problems of the steel industry, it is gratifying to note that the UK government is recalling both the House of Commons and the House of Lords during the Easter Recess for an emergency debate on the Steel Industry (Special Measures) Bill on 12 April 2025.
Ashis Banerjee