Concerns that Jingye intended to close the plant were first raised in September. But the situation became particularly alarming when the Chinese company ceased ordering additional raw materials and started selling off supplies. There was no returning to the negotiation table after Jingye rejected a £500m state rescue package and refused to guarantee that the furnaces would continue operating.
In response, in a rare weekend sitting, MPs were recalled from their Easter break in order to keep the furnaces running and prevent the collapse of the Scunthorpe business. As John Crace noted in his sketch, it was the first time the Commons had been summoned back on a Saturday since the Falklands war of 1982.
Now, British Steel is looking at offers of help from more than a dozen businesses to get the raw materials it needs to avoid the risky shutdown of one of the two furnaces.
A short timeline
British Steel was nationalised in 1967, bringing together more than a dozen private companies to form one of the largest steel producers in the world. Two decades later, the industry was privatised and broken up under Margaret Thatcher.
Tata Steel Europe sold the Scunthorpe steelworks to Greybull Capital, a private equity firm criticised as a “vulture fund”, for £1 in 2016. The company was renamed British Steel in a deal that included a pledge of £400m in investment. Within two years it entered insolvency. The company was nationalised in 2019 for 10 months while a new buyer was sought, during which time it cost the taxpayer £600m.
Jingye took over British Steel the following year, pledging £1.2bn in investment and offering assurances from its chief executive, Li Huiming, of the “beginning of a new illustrious chapter” in the history of British steelmaking. That chapter proved to be rather short.
By last September, Jingye had reversed course and was preparing to abandon its plans for electric arc furnaces and to bring forward the closure of its blast furnaces ahead of Christmas. The government succeeded in pulling Jingye back, but that was short-lived as well.
What now?
Reynolds now holds emergency powers that enable him to compel the company to buy the raw materials it needs, with the government covering the running costs, which Jingye estimates at approximately £700,000 per day in losses. A failure to order enough coal and iron has resulted in a shortage of vital raw materials that the plant needs imminently to remain operational. Without them, the furnaces would shut down, making closure all the more likely. Reynolds has however refused to say whether British Steel will be able to get the raw materials it needs in time.
The running costs are set to make a significant dent in the government’s £2.5bn steel fund. Reynolds said that the cost to the economy of closing the plant would have been at least £1bn, a figure he said would exceed the losses anticipated from nationalising the site.
The business secretary did not accuse Jingye of deliberately sabotaging the plant, though he did say that “it might be neglect”. The government does not expect Jingye to re-enter negotiations but Reynolds added that recent events had raised a “high trust bar” for Chinese firms seeking to invest in key British industries.
Increasing volatility in global markets, particularly in light of the Trump administration’s stance on European security and trade tariffs, has perhaps also put pressure on the government to keep the British steel industry afloat.
Is nationalisation the long-term answer?
A spokesperson for Community, the trade union that represents the majority of British steelworkers, said in an interview that nationalisation was “the right course of action”. And in parliament this issue made for strange allies with Reform’s Richard Tice and the former Labour leader Jeremy Corbyn in agreement. Politically, the optics of the intervention is relatively uncomplicated: the public is in favour of nationalising steel and the government wants to be seen as saving a British industry.
However, there are significant long-term questions for the government. The plant requires substantial investment to remain viable – the construction of two electric arc furnaces could cost as much as £6bn, according to the BBC. The energy costs associated with running new or existing furnaces are also very high. How this aligns with Rachel Reeves’s commitment to fiscal discipline remains uncertain. Labour has averted an immediate crisis but that offers no guarantee of long-term security.
