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The UK government needs a proper plan for steel

by Investor News Today
April 15, 2025
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The UK government needs a proper plan for steel
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The UK authorities has engaged in a dramatic rescue of British Metal, operator of the nation’s final two blast furnaces at Scunthorpe in Lincolnshire. After recalling parliament from recess to move emergency legislation, ministers have seized management of the plant and secured iron ore and coal to maintain the furnaces burning for now; at the least momentary nationalisation is now probably. What’s missing is an in depth plan for what occurs subsequent, as a part of a broader imaginative and prescient for UK trade.

British Metal’s proprietor, Jingye of China, needed twice the £500mn help the federal government had supplied to maintain the enterprise and shift to greener electrical arc furnaces, claiming this might value £2bn. After Jingye appeared to be attempting to run down the blast furnaces, ministers stepped in. Downing Road has downplayed recommendations that China was attempting to “sabotage” the struggling remnants of the UK metal trade; Jingye could have performed hardball in an abortive effort to extract the next help provide.

Closing Scunthorpe’s blast furnaces would make Britain the one G20 nation unable to provide “main” metal from ore; electrical arc furnaces make the steel from scrap. The controversy has change into muddied, although, between saving the furnaces short-term to permit a managed transition to new know-how — the agreed plan for a while — and conserving them longer-term so Britain retains some main steelmaking. Regardless of nostalgia and union hopes of conserving extra jobs, their day is almost completed. Partially, that is to do with decarbonisation; blast furnaces spew out huge quantities of CO₂. Largely, it’s about economics: the furnaces are many years previous and, says Jingye, lose £700,000 a day.

In an period of US-China commerce wars and geopolitical upheaval, and authorities plans to spice up progress by constructing a lot of homes and large infrastructure initiatives, attempting to show Britain’s rump metal sector right into a viable enterprise is smart to protect a measure of resilience. However this needn’t be blast furnaces. EAFs can now make most grades of metal, and Britain has a surplus of scrap.

Labour has put aside £2.5bn help as a part of a metal technique. It now must set out extra detailed plans for British Metal and the broader sector. The breakdown of belief with Jingye means nationalisation is probably unavoidable short-term. However to safe Scunthorpe’s future, ministers should persuade a brand new investor to show it right into a sustainable enterprise.

Which means implementing the EAF plan with one thing close to the £500mn grants that had been supplied to Jingye, and to India’s Tata Metal to do something similar at Port Talbot in south Wales. Trade insiders counsel that given such a subsidy, and a superb web site with ready-made clients — Scunthorpe provides 95 per cent of metal for UK rail tracks — this shouldn’t be inconceivable.

To make UK metal, and certainly different energy-intensive trade, extra viable the federal government should additionally act shortly to cut back industrial electrical energy costs which might be among the many highest within the developed world. This isn’t, as critics contend, as a result of shift to renewable vitality, however as a result of wholesale costs are set by the most expensive supply wanted to cowl demand — which is usually natural gas. Ministers are reviewing the market; the economist Sir Dieter Helm’s proposal to revert to the pre-privatisation mannequin of charging trade the long-run marginal costs of vitality has benefit.

Fairly than have interaction in additional advert hoc rescues, the federal government must also set out as a part of its coming industrial technique its definition of nationally strategic sectors. Which means figuring out the place the UK must retain home manufacturing or can depend on provide chains from pals, and what quantity will be concentrated in a single provider. Metal has a declare to be an space the place Britain retains capability — although not, in the long term, by way of the blast furnaces for which the federal government has simply secured a reprieve.



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