By Aysu Bicer and Nuran Erkul Kaya
LONDON (AA) – Once seen as a pillar of the country’s industrial might, British Steel is an entity in crisis – a crisis that has forced an emergency government intervention and sparked calls for stronger measures to protect the fragile sector.
In a dramatic turn of events last weekend, Parliament passed a special measures bill that allowed the Labour government to seize control of British Steel from its Chinese owner since 2020, the Jingye Group.
The issue stemmed from Jingye’s plan to shut down British Steel’s Scunthorpe site, home to the last blast furnaces where the country could make “virgin steel” – the kind produced from iron ore and that is critical for heavy-duty construction, military platforms, and national infrastructure.
Jingye’s intentions rattled the UK more because they followed the shutdown of the last blast furnace at the British Steel site in Port Talbot last September, a decision made by its Indian owner, Tata Steel, after years of losses.
For Jingye’s Scunthorpe operation, reports estimated daily losses of some £700,000 (nearly $930,000). The Chinese group wanted to shut it down before last Christmas, but negotiations led by Business Secretary Jonathan Reynolds helped prevent a closure that would put some 2,700 people out of work.
While talks over a government support package for the company continued over past months, Jingye warned in March that a shutdown was “a necessary decision given the hugely challenging circumstances the business faces,” citing US tariffs and greater environmental costs, according to a BBC report.
After Parliament passed emergency legislation for the government intervention, ministers insisted it was a one-off rescue, with Reynolds accusing Jingye of not acting in good faith. He said the UK had “got it wrong in the past” by welcoming Chinese investment in strategically sensitive sectors.
Government critics – especially China hawks in Westminster – are calling it a watershed moment, emblematic of the UK’s deeper dependence on Chinese capital across strategic sectors.
In response, the Chinese Embassy published a rare statement this week, defending Jingye and accusing unnamed UK public figures of slandering both the Chinese government and its businesses with “their arrogance, ignorance and twisted mindset.”
That followed comments from the Chinese Foreign Ministry urging the UK government to “avoid politicizing trade cooperation or linking it to security issues, so as not to impact the confidence of Chinese enterprises in going to the UK.”
- Reversing the decline
As UK officials now scramble to stabilize British Steel, while fending off accusations that their action comes far too late, the broader challenge, experts say, will be reshaping a sector that has shrunk drastically in both capacity and strategic relevance.
“We commend the UK government’s decisive action in ensuring continuity of steelmaking at British Steel,” said Chrysa Glystra, director of trade and economic policy at UK Steel, the main trade association for the UK steel industry.
“This is greatly significant both for the workforce, but also for the UK steel sector as a whole. We have seen our steelmaking capability shrink substantially in the UK in recent decades and we cannot let that continue. This is all the more important at a time of geopolitical turbulence and trade uncertainty.”
Steel, once viewed as a fading relic of the industrial age, is now back at the center of strategic planning. The UK imports nearly 70% of its steel, making its economy vulnerable to geopolitical shocks and foreign supply disruptions.
Once the engine of the British economy, the sector has been in long-term decline. In 2024, steel contributed £1.7 billion to the UK economy and supported over 37,000 direct jobs, but in terms of GDP share, it accounts for just 0.1%.
According to government data, the UK produced 5.6 million tons of crude steel last year, accounting for a meager 0.3% of global output. China, by contrast, produced over 1 billion tons, more than half the world’s supply.
British firms, experts point out, face major structural disadvantages: steep energy costs, burdensome regulation, and tough global competition, especially from state-backed Chinese firms.
While the UK has implemented trade remedies, including anti-dumping measures, their impact has been limited, and the recent reimposition of US tariffs on British steel and aluminum further muddied the waters.
- Green steel: Promise meets pressure
Climate policy adds another layer of complexity, as steel is central to the UK’s climate goals and essential for clean energy development: wind turbines, electric vehicles, and hydrogen infrastructure all require significant volumes of high-quality steel.
Yet traditional blast furnaces are carbon-intensive, accounting for 13.4% of the British manufacturing sector’s emissions and 2.2% of total UK greenhouse gas emissions, according to official figures.
The government has committed to supporting the industry’s green transition, centered on electric arc furnaces (EAFs), which recycle scrap steel and generate far fewer emissions.
Tata Steel, with £500 million in British government support, is transitioning its Port Talbot site to EAF technology – at the cost of 2,800 jobs. British Steel is planning a similar move at Scunthorpe and Teesside.
However, EAFs cannot produce virgin steel, raising concerns that the UK’s defense and infrastructure sectors could become overly reliant on imported high-grade steel.
Moreover, the green transition requires billions in upfront investment and infrastructure, along with reliable access to scrap and a robust energy infrastructure.
A comprehensive steel strategy is expected from the government this spring, while ministers have pledged £2.5 billion through the National Wealth Fund to support clean steel, alongside a further £5.8 billion for green hydrogen, carbon capture, and other low-emissions technologies.
Sector experts, however, say that financial support alone will not be enough, stressing the need for decisive structural reforms.
“After addressing the immediate situation at British Steel, it will be time to turn to the wider challenges of the steel sector that the UK government’s steel strategy must tackle boldly and quickly,” said Glystra.
“Competitive electricity prices, robust trade defense, a stronger CBAM (Carbon Border Adjustment Mechanism), proactive public procurement policy and a strategy around raw materials must sit at the heart of it.
“These are all essential to provide a competitive business environment that will attract investment and enable the UK steel sector to thrive in an even more challenging global landscape.”