Why is British Steel in trouble and who owns it?

The UK government is preparing to take over a significant British Steel facility located in Scunthorpe, which faces the threat of immediate closure.

Members of Parliament have been summoned back from their Easter recess to enact an emergency law aimed at ensuring the continued operation of the Chinese-owned site.

What is British Steel and how many employees does it have?
The Scunthorpe plant of British Steel, situated in Lincolnshire, employs 2,700 individuals, representing approximately three-quarters of the company's total workforce.

This facility is the only one in the UK capable of producing virgin steel, essential for major construction endeavors such as new buildings and railways.

The production process involves two large blast furnaces that create steel with fewer defects compared to the recycled steel produced in other parts of the country.

If the plant were to stop producing virgin steel, the UK would become the sole member of the G7 group of leading economies lacking the capacity to manufacture it, a situation the government considers a threat to the nation's long-term economic stability.

Who is the owner of British Steel and what are the reasons behind its financial losses?

British Steel was established in 2016 when Tata Steel divested its unprofitable long products division located in Scunthorpe to the private investment firm Greybull Capital for a nominal sum of £1.

The new proprietors subsequently rebranded the company as British Steel.

After experiencing a period of financial difficulties, British Steel was placed under the control of the government's insolvency service in 2019, and was subsequently acquired by the Chinese steel manufacturer Jingye in the following year.

The company reports that the plant is incurring losses of £700,000 daily, despite receiving £1.2 billion in investments. It has initiated a 45-day consultation process regarding potential job reductions.

Jingye attributes the unsustainability of the blast furnaces to "highly challenging" market conditions, tariffs, and the expenses related to the shift towards lower-carbon production methods.

The blast furnaces are responsible for generating the intense heat required to produce virgin steel, relying on coking coal and iron pellets as fuel sources. However, the Scunthorpe plant is experiencing a depletion of these essential raw materials.

This situation intensifies the urgency of the discussions surrounding British Steel, as shutting down a blast furnace leads to a costly and complicated restart process.

Recently, one of the company's customers accused British Steel of neglecting to procure the necessary raw materials to maintain operations at the site, a claim that Jingye has denied.

Steel production in the UK has been on a decline for several decades, and the financial challenges within the industry escalated in March when the United States implemented a 25% tariff on imported steel.

According to a UK government briefing on the sector, global overproduction has resulted in "a surplus of steel in the international market," leading to decreased prices. Additionally, British manufacturers are contending with higher costs, particularly for electricity, compared to their international counterparts.


Could the UK government assume control?
The government has summoned Members of Parliament to return from their Easter recess for an extraordinary weekend session in the House of Commons, as it considers measures to safeguard the site.

On Friday, Sir Keir Starmer revealed intentions to expedite legislation through Parliament that would empower the government to take charge of certain operations at the site.

This would grant the government the authority to procure raw materials necessary for maintaining the furnaces and to oversee the company's workforce and management.

The government has instructed the UK management of the company to ensure the site remains operational, and the proposed emergency legislation will guarantee that any employees dismissed by the Chinese owners can be reinstated.

This intervention does not equate to nationalization, which involves the government taking ownership and control of a company; however, Sir Keir stated that the government would do "everything possible" to "protect" the steel industry in the UK.

The Prime Minister's decision to introduce emergency legislation comes after a series of strained discussions between the government and Jingye earlier this week, which seem to have largely faltered.

The government proposed purchasing the essential raw materials required to maintain the operation of the furnaces; however, Jingye rejected this offer.

Trade unions have indicated that the situation is precarious, with the Community Union labeling the shortage of supplies necessary for furnace operation as an "extreme emergency."

Linda McCulloch from the Unite union expressed a desire for the government to nationalize the facility "to preserve steelmaking in the UK."

Additionally, the GMB trade union has voiced concerns to the BBC regarding Jingye's management of the plant.


Who are the other steel producers in the UK?

According to government statistics, the UK steel sector comprises 1,160 companies that directly support an additional 40,000 businesses nationwide.

Tata Steel, located in Port Talbot, Wales, was previously the largest producer of virgin steel in the UK. However, it ceased operations at its blast furnace in September 2024, citing daily losses of £1.7 million.

A deal was established with the UK government, which pledged £500 million to assist the company in transitioning to more environmentally friendly steel production methods.

Other notable steel manufacturers in the UK include Liberty Steel, Celsa, Marcegaglia, and Outokumpu.

Liberty Steel operates a facility in Scunthorpe that is currently at risk of closure, putting over 120 jobs in jeopardy due to escalating energy costs.

In 2023, the UK steel industry contributed £2.3 billion to the national economy, representing 0.1% of the overall UK economic output and 1.0% of the manufacturing output.

During the same year, the UK produced 5.6 million tonnes of crude steel, accounting for 0.3% of global production. In contrast, China produced over 1,000 million tonnes, which is 54% of the world's total output.

The European Union produced 126 million tonnes of steel in 2023, making up 7% of global production. Within the EU, the UK ranked as the eighth largest steel producer, following Germany, Italy, Spain, France, Austria, Poland, and Belgium.