The government is presiding over the collapse of the steel industry. It is one of many casualties of its high energy prices and carbon taxes. The traditional two last blast furnaces at Scunthorpe struggle with dear fossil fuels and with high carbon taxes. The more modern electric arc furnaces elsewhere which the government prefers suffer from dear electricity. Are the government misleading the employees about the future of all their jobs given the absence of a realistic plan to run the blast furnaces as a long term proposition?
The government in a dramatic move legislated one Saturday a year ago to take management control of Chinese owned Scunthorpe, giving taxpayers the task of paying the bills for the heavy losses to keep the plant operating. It was a bad unilateral decision made against the wishes of the owner, Jingye. The Chinese had concluded there was no viable way of running the old blast furnaces and wanted to close them. Understandably the government wanted to save the jobs. Stupidly they gave up negotiating a solution with the owners and took it over without buying the plant and without agreement on terms. They now face compensation claims for a near bankrupt works and two very old furnaces which they operate but do not own.
Civil service advice was more cautious pointing out the risks of taking it on. The Secretary of State had to issue a direction to accept these liabilities. The Treasury was apprehensive about the possible scale of the financial commitment so they refused special funding . They told the Business department to pay for it by cancelling other programmes or finding other savings in its budget. The government promised early resolution of the dispute with the owners and a business plan for the plant. No agreement and no realistic plan has been forthcoming, one year on.
The cruel irony of the attempt to save blast furnace jobs is the government had been offering the Chinese a big grant to replace the blast furnaces with a new electric arc plant with far fewer jobs. This may still be their plan, as blast furnaces burning coal do not conform with government net zero targets. Electric arc technology is for steel recycling, so if we come to rely just on that the UK will have no capacity to make virgin steel. This will all have to be imported from countries less queasy about using coal.
The National Audit Office has recently set out what a financial disaster this has been to date. The losses are a staggering £1.3 m a day with an estimated total of £642 m by this June. If the government goes on like this at £500 m a year or more it will gobble up most of what remains of the £2.5 bn set aside for steel restructuring and modernisation over the next three years. It could charge nationalised British Rail more for the track it buys from the steel company, but that still sends the bill to taxpayers and would be resisted by the Department of Transport paying the huge rail losses.
The subsidies to Scunthorpe buy no new plant and no improved Business Plan. Meanwhile Ministers will face more investigations about value for money. The Scunthorpe workforce will be concerned that many could still lose their jobs if government firms up its old plans to replace these furnaces with electric arc recycling capacity.
The proposed Bill in the King’s speech will be difficult to draft and agree. Jingye want payment for their assets. The UK must argue these were ageing and heavily loss making. They came with a workforce the owners wanted to make redundant at considerable cost. The past debts built up by the owners should not fall on taxpayers. Will the UK sustain this case? Will the Chinese come to accept it, or could they pursue a successful court action? This government seems to specialise in giving money to foreigners to try to buy their goodwill.
The current funding of the company by the UK Treasury is technically a loan, but the company has no money to pay interest on it let alone repay it. Ideally the government late in the day negotiates terms with the owner for the state takeover. If no sensible terms are available the government could legislate to emforce nationalisation on its terms. That sends a bad message to other foreign investors in the UK and to those thinking of coming here. The Chinese state could raise legal and political objections to such conduct and could threaten retaliation against UK investments in China.
Ministers should have thought of these dangerous financial and political consequences before they blundered into paying bills at a business they do not own. Their officials are protected by not signing off the action and warning of the risks.
Labour is rarely happy these days but it has cheered the idea of full nationalisation. Will they go on cheering as the bills mount, pre-empting other spending? Will they cheer compensation to China for a near bankrupt business? Will they cheer if the next plan requires closure after all and replacement with electric arc? What will Ministers do if more officials and auditors say the spending did not offer value for money?
The government has already used a Brexit freedom to impose a savage 50% tariff or tax on much more imported steel. This is a blow to steel using businesses and construction in this country. It may force more of those to close. Hanging over all of this is dear energy, shutting down far too much UK industry.
Labour wants us to believe nationalisation is a superior way of running a business. This Scunthorpe scandal shows just how much taxpayers money you can lose and put at risk by not agreeing public control with prior owners, and not having a realistic business plan. If the UK ends up sacking most of the workforce with or without putting in another heavily subsidised electric arc furnace what was it all for? If there is a plan to run on with our own blast furnaces, where is the plan to modernise and re line them? When will we get good value fuel and taxes the industry can afford to give it more of a chance of commercial success? Meanwhile how much damage will the high tariffs do to steel users also struggling to make a living? This is no way to save a crucial industry. A state without its own primary steel making has weakened its own national security.
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May 21, 2026
We will be the only country in the G7 incapable of making primary steel but never mind. As Lady Nugee said during the debate in destroying the North Sea production, we’re British, we need to show the way in these things.
Now we intend financing Putins war by buying products refined from sanctioned oil the stupidity ofvthese people is off the scale.
May 21, 2026
The old saying they couldn’t run a booze (sic) up in a brewery would be an appropriate comment, but it now looks like this government is also presiding over closure of our brewing industry too, so even that saying will become obsolete. In years to come people will ask, what is a brewery?
Other core industries this government are determined to close are.
Oil Refineries, Glass industry, The Ceramics industry, The Motor industry, The Oil Industry, The Gas Industry, The Farming industry, The Mining Industry, The Off Shore Fishing Industry, The Defence Industry. The White Goods Industry. Most remarkable of all is the decline in the construction Industry despite claims by government to be building record new homes. Despite State hype the industry continues to decline with building completions collapsing. No pun intended.
With that list in mind, we won’t need to worry about putting off foreign investment by actions surrounding Scunthorpe Steel. What have any investors got left to consider investing in?