It all seemed so simple on paper in the Labour manifesto published last summer: “£2.5 billion to rebuild our steel industry”. This would be part of the National Wealth Fund’s “remit to support Labour’s growth and clean energy missions … attracting three pounds of private investment for every one pound of public investment, creating jobs across the country”.
With the imminent renationalisation of the blast furnaces at British Steel’s sprawling Scunthorpe steelworks, things now look a little different.
In a highly unusual move, parliament has been recalled to sit on Saturday to vote on powers allowing the nationalisation of British Steel and so prevent the loss of nearly 3,000 jobs.
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Unite, the biggest union for steelworkers, welcomed the news and Sharon Graham, its general secretary, said: “It is essential that Scunthorpe receives the relevant infrastructure and kit to allow it to thrive as a modern steel producer long into the future.”
Sky News reported that the accountancy firm EY was being lined up by the government to play a role in the emergency nationalisation of the company.
How the company, now owned by China’s Jingye Group, and the wider steel industry in the UK came to be yet again on the brink of collapse is a story of a seemingly inexorable business failure along with political ineptitude and high-minded ambition, all colliding with the cold, hard reality of the market.
Sir Keir Starmer, the prime minister, had said that Labour’s steel policy would “give this industry its future back”, as he blamed the Conservatives for a lack of strategy to secure the sector’s long-term future.
Starmer had the cure: “Labour will invest alongside industry and the workforce in all available clean steel technologies to ensure UK steel can provide growth and economic security for decades [and] fill the order books of Britain’s steel industry for decades to come.”
The scale of the ambition, said Starmer, was this: “A long-term programme of investment in clean steel technologies delivered by the National Wealth Fund. The UK and its steel communities have the potential to be a world leader in clean steel.”
The “greening” of the steel industry would come through lowering Britain’s energy costs and in a virtuous circle that would enable the production of steel for the manufacture of solar panels and wind turbines.
In Labour’s first torrid 100 hundred days in power, however, cold reality was biting hard.
Tata Steel had already unilaterally decided to shut its blast furnaces in Port Talbot and announce 2,500 redundancies, forcing the government’s hand in a £500 million bailout to help fund the layoffs.
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By its own testimony, Labour had to support Tata’s plans to embrace the transition to the green steel of electric arc furnaces at Port Talbot while wringing its hands over the economic and social carnage of the layoffs from such an abrupt industrial decision.
Meanwhile, as the chill of Labour’s first autumn began to descend, talks between ministers and British Steel — owner of the country’s other blast furnaces, in Scunthorpe — were breaking down.
Its parent company Jingye was holding out for a £500 million-plus bailout and threatening job losses even greater than those seen at Port Talbot.
Those talks appeared to have broken down last month when Jingye, which acquired British Steel from the receivers five years ago, declared like Tata that it would be closing its blast furnaces at Scunthorpe as early as this summer in the face of annualised losses of £250 million, total losses under its ownership of more than £1 billion, and a lost sunk investment in the business of £1.2 billion.
President Trump’s tariffs on the import of non-US steel will affect British Steel not so much because of lost exports to America but because of the collateral damage from the amount of cheap steel from Asia originally bound for the US swamping the UK market.
A managed transition at Scunthorpe — preserving the blast furnaces for the immediate production of steel to satisfy demand from defence companies, the railways, the construction industry and the green energy sector — has unravelled fast.
It has come apart to the point that nine months into the new Labour administration it is not the opportunities that new steel technologies might bring that are being discussed in Downing Street but plans to save the industry itself — and that dreaded word from past Labour governments: renationalisation.
The future of Scunthorpe is now about the immediate saving of 2,700 British Steel jobs that Jingye says will go with its projected closure of the furnaces.
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British Steel in its present guise is a relatively recent construction. The original British Steel was created in 1967 by the prime minister Harold Wilson’s nationalisation of the industry. It was then privatised and sold by Margaret Thatcher in 1988. A decade later the stock market-listed British Steel merged with Hoogovens of the Netherlands to create Corus which then sold up to Tata Steel of India in 2007 in a £6.2 billion deal.
Within a decade Tata Steel UK, under increasing pressure from cheap imports into Europe and Britain from China, and from an increasingly restive parent board in Mumbai, was facing a bleak future. The directors called a meeting to decide its fate in the spring of 2016.
David Cameron’s government of the time, seemingly oblivious to the unfolding crisis, was caught flat-footed with the business secretary Sajid Javid so apparently unconcerned that he had gone on holiday to Australia.
The board of Tata, which owned the last three great steel production facilities left standing in Britain, determined that the UK steel market was unsustainable and that it must reduce its exposure. It would keep the largest plant, Port Talbot, and dispose of the blast furnaces at Scunthorpe and the electric arc furnaces at Rotherham.
What happened next illustrated the paucity of government due diligence in the preservation of steel production.
Rotherham went to the Liberty Steel interests of Sanjeev Gupta, a businessman who is being prosecuted over his alleged failure file accounts for more than 70 companies.
Scunthorpe went to the Meyohas brothers, Marc and Nathaniel, who ran a business called Greybull Capital, a fund that specialised in distressed assets and which portrayed itself as turnaround specialists, though a number of its acquisitions have gone bust.
They bought Scunthorpe from Tata for a nominal £1 and rebranded the business British Steel, promising investment, profits and job security.
Within three years British Steel was in the hands of the receivers. Scrambling around to save the business, the then prime minister Boris Johnson did a deal with Jingye, a Chinese steelmaker little known in Britain.
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And so to today. There stands an uneconomic steelworks and a Labour government trying to work out what happens next.
It is set against the political tableau of the Reform UK party going hard in the forthcoming local elections to win the new mayoralty of Greater Lincolnshire with the Conservative defector Dame Andrea Jenkyns, a former Tory MP in Yorkshire, as its candidate.
In Scunthorpe, Jenkyns and her leader Nigel Farage have said that any course other than renationalisation would be the abandonment by the Labour government of the workers and their communities.
Within Labour, Liam Byrne, the former minister and now chair of the business and trade select committee in the Commons, has told Starmer what he thinks: saving the blast furnaces has to be a priority but at the same time there needs to be publication of a 25 to 30-year strategic plan for the future of the industry.
Define what the UK’s sovereign capabilities need to be, shield producers from unfair trade, use public procurement and cut energy costs to level the playing field, says Byrne. But, as he added: “The crisis at British Steel warns us the next few days may matter more than the next three decades.”
There is a recent precedent of nationalisation in the steel industry. Four years ago Johnson’s government took Sheffield Forgemasters into public ownership to secure the supply of critical components for the country’s defence and nuclear programmes, including the construction of the Royal Navy’s warships and submarines in Scotland and Cumbria.
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If Britain is to lose its primary steel production capabilities then it will be the only nation among the G7 major economies to be without such a sector. That would leave the UK dependent on imports during this most unstable of geopolitical periods; and effectively exporting our own carbon commitments by buying steel from highly polluting overseas plants.
The message from UK Steel, the sector’s trade body, is that without Scunthorpe, defence companies, the UK automotive sector including the earthmovers and diggers of JCB, the whole construction and infrastructure industry, and Network Rail will have to source their steel from elsewhere. That, it says, is not just a case of national pride but of national security and industrial sovereignty.
