UK government to take control of Chinese-owned British Steel

At a rare weekend session, parliament approved the law to avert the shutdown of the UK’s last factory that can make steel from scratch, hours after workers evicted Chinese executives from the site, fearing sabotage.

Prime Minister Keir Starmer leaves Number 10 Downing Street on Saturday. Picture: Jack Taylor/Getty Images

The British government has taken control of Chinese-owned British Steel, after an emergency recall of parliament on Saturday heard Beijing was planning to “close down the British steelmaking industry.”

The struggling steel plant in the country’s north, the last British factory that can produce steel from scratch, was facing imminent closure as its owners Jingye were threatening “to cancel and refuse to pay for existing orders,” and shut down the plant’s furnaces, with the loss of tens of thousands of jobs MPs were told.

At the rare weekend session, parliament approved the law without opposition to take over the running of the Scunthorpe site, which produces steel crucial for UK industries including the defence industry, construction and rail transport.

In a last minute drama, on Saturday Scunthorpe workers prevented Chinese executives from entering the plant, fearing sabotage to turn the furnaces off. Once the furnaces are turned off it is extremely difficult – although not impossible – to turn them back on. Police were called and the Chinese delegation left the site.

The sudden government takeover will impact indirectly on the Australia’s multi billion dollar AUKUS nuclear submarine deal.

It has also created a further rift in British-Chinese relations but the anti-China move may be favourably received by Washington, and enhance the current UK-US trade talks.

All parties in AUKUS rely on both domestic and imported steel from Europe and North America and the government’s vote to control British Steel, means Britain can continue to manufacture virgin grade steel.

The company supplies steel for some military purposes, although much of the AUKUS nuclear grade steel and specialist steel parts for the submarines is being sourced from the UK Ministry of Defence company, Sheffield Forgemasters, which has invested £900 million from both the UK and Australian governments to skill up 650 specialist workers.

An aerial view, the British Steel Scunthorpe Site is seen on Saturday. Picture: Ryan Jenkinson/Getty Images

The vote was called with British Steel facing closure in days, with the loss of 2700 jobs after union workers warned that the company had cancelled forward orders of iron ore coking coal needed to keep the furnaces on to make the steel.

British Business Secretary Jonathan Reynolds said China had wanted to “irrevocably and unilaterally closed down British primary steel making” and had been demanding an “excessive amount” from the British government to keep the furnaces going. It is understood the UK government offered the company half a billion pounds to keep going, while Jingye wanted £1 billion without any guarantees of future operations.

Industry group UK Steel said: “A blast furnace is a dynamic piece of machinery. If the fires go out, it is nigh on impossible for it to be brought back to life”.

The British government has been mindful of the upheaval of the past few months with the United States 25 per cent tariffs placed on steel. There has been an almost immediate recalibration of priorities to keep important industries within the country after Donald Trump’s threats to withdraw from NATO and the ongoing trade wars.

UK Prime Minister Sir Keir Starmer wants to focus on rebuilding Britain’s industries to become more self-reliant.

If British Steel had closed, then Britain would have been the only G7 nation not to manufacture their own steel.

The recall of both the House of Commons and the House of Lords, in the middle of a recess is the first time since 1982 when parliamentarians sat to approve the start of the Falklands War.

The debate of the Steel Industry (Special Measures) Bill passed the Commons by lunchtime and was heard in the Lords in the afternoon. Sir Keir immediately headed to Scunthorpe after the vote and told steelworkers: “You are the people who have kept this going.“

“It’s your jobs, your lives, your communities, your families,” he said.

Mr Reynolds now has the legal authority to buy the coal and raw materials to keep the furnaces operating and it is the first step to full nationalisation.

Jingye has owned the mill, formerly owned by Tata Steel, since 2020 and said it had invested more than £1.2 billion to keep it operating but was making “significant” financial losses of about £700,000 a day.

British taxpayers will now take on that financial burden, amid fears already sky-high business and household energy prices will rise further to pay for it.

Electricity costs for British steelmakers is nearly double that paid by steel companies in Germany and France.

UK steel said the average price faced by UK steelmakers for 2023/24 was £113/MWh compared to the German and French prices of £61/MWh.

Figures from the Australian Energy Maker Operator quarterly report in January shows the average cost of electricity across Australia was $88/MWh, roughly a third of what the UK charges.

The British government’s move will save 2700 jobs, but importantly will keep high grade steel manufacture within its shores.

The former Tory leader Iain Duncan Smith told parliament the actions of the Chinese company was “part of the pIan” to shut down steelmaking in the United Kingdom and force the country to buy steel from China, which has a current oversupply.

Mr Duncan Smith said: “Far too many countries like China have abused the rules of the free market, have subsidised their industries ridiculously, and have used slave labour to produce products. When that happens, the free market is dead.

Members of parliament in the House of Commons take their seats at the start of a debate on emergency legislation to take special measures to protect the British Steel Industry. Picture: PRU / AFP

“China now itself is suffering from an overproduction of steel. “Their own housing industry has gone static on them, and they were one of the biggest users of the steel produced by China. Where is that steel going to go?

“And it’s no surprise by the way that a Chinese company Jingye is involved in this, because by pushing forward to shut down the blast furnaces in the UK, they know that we will have to buy slab steel from China. This is not a coincidence. This is all part of the plan.”

Scunthorpe resident Lynne Atkinson, told the BBC that if the furnace had closed it would leave British defence exposed.

“There are always going to be wars,” she said.

“If something does happen, and we’re reliant on imports from China for instance, they would immediately side with Russia and cut us off and we’d have no way of making steel. I think it’s madness.”

Reform UK leader Nigel Farage said the government had had weeks to step in, but had decided to do it on a Saturday, “to be dramatic” as well as being terrified of what the Reform vote is doing to the northwest and the northeast of the country.

He added: “It’s just a sticking plaster. Frankly if Jingye, the Chinese owners, are bad faith actors, which I have believed them to be for five years, and today the business secretary said they are not acting in good faith, they should have just done the whole hog today, nationalised it and then tried to find a way of selling it on.”