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British Steel has announced that steelmaking in Scunthorpe is heading for closure as operations are “no longer financially sustainable”. The UK government has said it would consider nationalisation if necessary but a “commercial solution” was still possible.
Founded in 2016 from the ashes of Tata Steel, British Steel has had a challenging decade because of reduced demand for the metal and tough competition from Chinese manufacturers.
In 2020, Chinese firm Jingye Group acquired British Steel with a commitment to invest £1.2bn over 10 years to modernise its sites and boost energy efficiency.
Jingye had plans for a number of initiatives, including developing the electric arc furnace in Teesside, constructing a new 250MW power plant to serve the Scunthorpe site, and investing in rolling mills to produce high-quality steel products.
However, over the past five years, despite having already invested more than £300m at the Scunthorpe site, the Chinese-owned company revealed that losses have spiralled to more than £400m. It said it is making significant financial losses of around £700,000 a day.
Matters came to a head when at the end of March British Steel announced it was to consult on the closure of its two blast furnaces, steelmaking operations and a reduction of steel rolling mill capacity in Scunthorpe.
The firm said that the blast furnaces and steelmaking operations were no longer financially sustainable because of “highly challenging market conditions, the imposition of tariffs, and higher environmental costs relating to the production of high-carbon steel”.
It said that despite having sought support from the government for a major capital investment in two new electric arc furnaces, no agreement had as yet been reached. Without government support, 2,700 jobs could be lost at the site.
The BBC reported that Chancellor Rachel Reeves spoke to trade unions over the weekend to explain the government's outlook on the steelworks’ future, reassuring them that the government would consider nationalisation if necessary.
Taking questions from MPs on the Commons Liaison Committee on Tuesday, prime minister Keir Starmer reiterated the government’s support for steel production in the UK.
He said that “all options remain on the table” when it comes to potential government support.
While nationalising the company remains a possibility, culture secretary Lisa Nandy told the BBC today that a “commercial solution” was still possible.
She said that British Steel would “continue to be an important part of our economy for years to come”, adding that a deal to secure its future was “achievable and within sight”.
According to The Guardian, the Scunthorpe plant, which makes nearly all the steel that Network Rail uses for Britain’s train tracks, is understood to have just days left to order the raw materials required to keep the furnaces fed.
The business secretary, Jonathan Reynolds, is said to be preparing for discussions with Jingye about the plant’s future.
Domestic steel manufacturers are considered critical for ensuring the UK’s long-term national security, not least because the material is foundational for military equipment, infrastructure and critical industries, including defence, transportation and energy.
However, the UK’s steel industry has been in decline for decades and if the Scunthorpe factory had to shut down, the UK would be the only G7 economy without the ability to make virgin steel.
The Port Talbot steelworks, the largest domestic steelmaking site left standing, is getting ready to close its blast furnaces, which will lead to at least 2,500 job losses.
Tata Steel, the Indian conglomerate that operates the facility, said the site was losing £1m a day and was financially unsustainable.
Donald Trump’s plan to introduce a 25% tariff on all imported steel and aluminium is yet another blow to the struggling sector.
The November/December 2024 issue of E+T featured a news analysis of the UK’s steel sector: How British steel can survive in a flooded market.
