Just days after Keir Starmer declared the “end of globalisation”, his government is scrambling to save what remains of the UK’s steelmaking capacity. After months of uncertainty in back-and-forth negotiation between British Steel’s Chinese owners, Jingye, and Whitehall officials, on 26 March the company announced a consultation on the closure of the remaining blast furnaces at its site in Scunthorpe. If the blast furnaces are switched off, the UK will lose its capacity to make virgin steel (making it the only G7 country unable to do so), and 2,700 jobs will be lost.
Talks reportedly broke down after Jingye rejected a £500m offer from government. The company had requested £1bn in subsidies to assist it to make the transition from the coal-powered blast furnaces to two new electric arc furnaces which are a cleaner alternative (though they are unable to smelt virgin steel from iron ore). The company, which bought British Steel out of liquidation in 2020, is reportedly making losses of £700,000 per day in keeping the blast furnaces in operation.
Jingye has been engaged in knotty negotiations with the government over the transition to electric arc furnaces since 2023. A crunch point was reached on 8 April: according to Bloomberg, the government is reportedly considering nationalising British Steel in light of concerns of the plant’s imminent closure. Insiders have reported that Jingye has not ordered the raw materials and coal needed to keep the two blast furnaces running.
I visited Scunthorpe for the New Statesman in January. I found a town suffering through decline. Though the blast furnaces remained open, the deterioration of the steelworks has had a profound impact on the town. Its high street, bookended by branches of Greggs, was almost deserted. More than one person told me that if the steelworks shut, Scunthorpe would become a “ghost town”. Its entire existence is reliant on the industry.
The decline of British steel has been slow and painful. In the 1960s, the UK was the fifth-largest exporter of steel; in 2023, it had slumped to around 25th. The industry never recovered from privatisation in the 1980s and has failed to keep up with international competition (particularly from China), which pushed steel prices down. The rise in UK energy costs added an additional and seemingly insurmountable financial burden. Successive governments, including the previous Conservative one, have continually deferred the development of a durable strategy for steel. As a result, the industry is on its knees.
The UK has been here before. Last year, Tata Steel closed the blast furnaces at its plant in Port Talbot, south Wales. A year of negotiations between the government and Tata resulted in a £500m deal for the Indian multinational to oversee the construction of an electric arc furnace at the site – though 2,500 jobs were lost.
Instead, Labour should do what successive governments have failed to and come up with a long-term plan for steel. Since it was elected, Labour has gone some way in trying to do this, pledging £2.5bn towards saving the industry, beginning work on a steel strategy and establishing a steel council. But the issues currently being faced by UK steel have long been known, and those in the sector may argue that this is simply too little too late.
That the government is locked in negotiations with Jingye at the start of this new world order is significant. Obviously, finding a more sustainable (both financially and environmentally) method of steel production is essential. But going all in on electric arc furnaces may not be the long-term answer that the government and British Steel think it is. Virgin steel is an essential component in defence manufacturing; and clearly, considering the government’s recent increase in defence spending, this need is not going away. If Scunthorpe closes, the UK will have to import the steel it needs for these manufacturing processes, leaving it open to the fluctuating prices of international markets at precisely the moment when global economies are beginning to turn inwards. Any unexpected international shocks may prove costly.
By coincidence, I am writing this piece from Port Talbot, where I’m reporting on another story for the New Statesman. The former blast furnaces loom over the town – a constant reminder of its squandered industrial past. It sits one step ahead of Scunthorpe in this journey. The government has an opportunity to learn from the mistakes that have been made here in Wales. But to do so, it must act fast.
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