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The UK government has allocated nearly £100 million to support the bailout of British Steel, which it took over just weeks ago from its Chinese owner, Jingye.
On Thursday, Business Secretary Jonathan Reynolds informed the House of Commons that £94 million of taxpayer funds have been utilized to keep the factory operational since the government passed emergency legislation in early April to take control of British Steel.
This company, the final producer of steel from primary materials in the UK, employs approximately 3,500 individuals in the country, with around 2,700 based in Scunthorpe.
Reynolds stated, “The working capital provided to British Steel so far totals £94 million, which is much lower than if we had offered a significant sum to Jingye or faced the total closure of the entire British Steel operation.”
He further claimed that the expenditure to date is significantly less than the potential £1 billion cost that a total collapse of British Steel would entail. It’s also lower than the £1.2 billion Jingye requested in financial aid to sustain its unprofitable operations while transitioning to more sustainable steel production methods.
Andrew Griffith, the shadow business secretary, cautioned that the rescue could ultimately lead to billions of pounds in costs for taxpayers down the line.
“Isn’t the reality that eventually, this will have to be funded from his department’s budget at the cost of financial support for sectors like automotive, exporters, or hardworking trade negotiators?” the Conservative MP questioned in Commons on Thursday.
Ministers have frequently mentioned a “war chest” of £2.5 billion available for green steel initiatives, which might stem from the state-operated National Wealth Fund.
Griffith expressed doubt over whether the funds could realistically come from the National Wealth Fund, which, despite being state-owned, operates independently.
The Labour government aims to find a new purchaser for British Steel from the private sector, although analysts are skeptical about the chances for a quick sale, given Jingye’s reported losses of £700,000 per day.
Last month, ministers intervened with emergency legislation to take over the facilities after Jingye announced intentions to shut the Scunthorpe blast furnaces and eliminate thousands of jobs.
A closure would mean the UK would be the only G7 country lacking the capability to produce steel from raw materials, even as the Scunthorpe facility depends on imports of iron ore and coking coal to function.
Discussions between ministers and Jingye had involved plans to replace the blast furnaces with electric arc furnaces that would recycle steel rather than creating it from scratch.
A comparable arrangement was made with India’s Tata for its Port Talbot site in South Wales, resulting in the closure of two blast furnaces there.
Jingye had requested £1.2 billion for its proposed £2 billion initiative to transition to green steel production but withdrew when the government countered with an offer of only £500 million.
The business was previously nationalized in 2019 by the then-Conservative government before being sold to Jingye for a minimal price. The temporary nationalization during 2019 cost taxpayers £600 million.
Officials and industry experts are currently working on an “investment case” to attract a private buyer for British Steel, though the business secretary has indicated that nationalization of the company remains a “likely option.”
