British Steel has confirmed it will continue operating both blast furnaces at its Scunthorpe site, bringing an end to redundancy consultations that had put 2,700 jobs at risk. The announcement follows the UK government’s passage of the Steel Industry (Special Measures) Act on 12th April 2025 – a rare intervention that grants ministers temporary powers to oversee industrial operations deemed of strategic national importance.
The legislation has enabled the government to step in and reverse an earlier decision by former owner Jingye Group to close the furnaces, citing unsustainable financial losses – reportedly £700,000 per day – and persistent supply chain instability. The shutdown would have ended the UK’s ability to produce virgin steel domestically – a process critical for manufacturing high-grade steel required in sectors such as defence, construction, energy, and transport. Were the shutdown to have taken place, the UK would have been left as the only G7 nation without primary steel production capabilities.
Lisa Coulson, Interim Chief Commercial Officer at British Steel, confirmed that the HR1 redundancy notice submitted in March has now been formally withdrawn. Trade unions Unite and Community welcomed the decision, praising the coordinated efforts between government, industry, and the workforce to protect jobs and preserve the UK’s sovereign steelmaking capability.
Decades of strain: how British Steel reached breaking point
“However, economic realities soon overshadowed the initial optimism. By 2019, British Steel faced compulsory liquidation, with more than 4,000 jobs at risk”
For decades, the steel sector has operated within a framework of fluctuating state support, intense global competition, and rising operational costs, leaving legacy firms such as British Steel exposed to market volatility and structural pressures.
Privatised under Margaret Thatcher’s government in 1988, British Steel subsequently became part of Corus before being acquired by Tata Steel. The resurgence of the “British Steel” name in 2016 came with the sale of Tata’s Long Products Europe division to private equity firm Greybull Capital for a nominal £1 – with promises of revitalisation.
However, economic realities soon overshadowed the initial optimism. By 2019, British Steel faced compulsory liquidation, with more than 4,000 jobs at risk. Following months of uncertainty and public concern, the company was acquired by the Chinese conglomerate Jingye Group in March 2020, which pledged a substantial £1.2 billion investment over a decade to revive operations at its Scunthorpe-based facilities.
Despite this infusion of capital, British Steel continued to grapple with both domestic and international challenges. High electricity costs, reportedly up to 50 per cent higher in the UK compared to Germany, for example, coupled with carbon pricing and regulatory uncertainties, compounded the company’s struggles. Moreover, competitors in regions like Asia and Eastern Europe benefited from state subsidies and more lenient environmental standards, further undermining British Steel’s competitive position.
To address these issues and modernise the UK’s steel industry and transition towards greener technologies, the UK government extended a £500 million offer to Jingye Group, in order to facilitate the shift from traditional blast furnaces to electric arc furnaces (EAFs). This investment was part of a broader £2.5 billion commitment under the “Plan for Steel,” aimed at supporting the steel sector’s transition to low-carbon production methods.
However, the firm declined the offer, expressing reluctance to invest in the necessary raw materials to keep the blast furnaces operational. The rejection of this substantial financial package underscored the complexities of aligning foreign ownership interests with national industrial strategies.
“This is what prompted the government to act with such urgency – as it became clear that without intervention the furnaces could be shut down within days – or even hours – of the final batch of materials being consumed”
By early 2025, Jingye had begun scaling back investment and, in late March, announced it would no longer purchase raw materials for its two blast furnaces at Scunthorpe. The announcement followed mounting financial losses – totaling £408 million in 2022 and £231 million in 2023 – and weeks of internal deliberations by Chinese parent company Jingye Group, which had grown increasingly reluctant to continue underwriting operations in the face of high energy costs and weak margins.
This decision created an immediate crisis. British Steel’s blast furnaces rely on a continuous feed of iron ore and coking coal to operate. If either supply is interrupted, the furnaces cannot simply be paused, they must be permanently shut down through a process known as a “Salamander Tap.” This involves draining the molten iron from the furnace and rendering it inoperable, a procedure that effectively ends production and would have destroyed the UK’s only remaining primary steelmaking capacity.
At the time, it was not clear whether additional shipments of coking coal or iron ore – some of which were reportedly already in transit from overseas suppliers – would arrive in time. The uncertainty wasn’t just about transportation logistics but also about who would pay for the cargo. With British Steel refusing to confirm financing and Jingye distancing itself from further commitments, there was no guarantee the vessels carrying vital raw materials would dock and unload at Immingham port.
This is what prompted the government to act with such urgency – as it became clear that without intervention the furnaces could be shut down within days – or even hours – of the final batch of materials being consumed.
British Steel and the risks of foreign ownership
The British Steel crisis highlights the risks inherent in foreign ownership of critical national infrastructure. While the UK has traditionally welcomed foreign direct investment, the strategic implications of such ownership are being reassessed globally.
The acquisition of British Steel by the Chinese-owned Jingye Group was initially welcomed for the capital injection and job preservation it promised. But as losses mounted and Jingye’s strategic decisions began to conflict with national interests, the risks of foreign ownership became more apparent. The government’s intervention under national security grounds reflects a broader global trend of reevaluating economic dependencies.
Steel is a foundational industry underpinning the production of military hardware, critical infrastructure, and transport systems. The UK armed forces alone require over 100,000 tonnes of high-grade steel each year. Domestic production ensures supply chain reliability, quality control, and strategic independence during crises.
The National Security and Investment Act 2021 already expanded government powers to scrutinise foreign takeovers in sensitive sectors. The British Steel intervention goes a step further, signalling that the state is willing to proactively manage or reclaim critical assets if foreign ownership undermines national interests.
At the same time, this situation presents a paradox for the Labour Party, which has indicated a desire to position the UK as a more attractive destination for global investors. Rachel Reeves’ January 2025 visit to China marked the resumption of high-level economic talks after a six-year hiatus. The visit aimed to foster a “pragmatic” relationship with China, balancing economic cooperation with national security concerns. Reeves emphasised that while the UK seeks to attract foreign investment to boost economic growth, it will not compromise on national interests. She stated that disengaging from China would be “very foolish,” highlighting the importance of maintaining open trade channels with the world’s second-largest economy.
The future of British Steel: Forging a greener future: the path to low-carbon steel
The steel industry is both a cornerstone of industrial capacity and a major emitter of greenhouse gases. In the UK, steel production accounts for approximately 12 million tonnes of CO2 annually, representing around 2.7 per cent of Britain’s total emissions. Decarbonising the steel sector is essential if the UK is to meet its legally binding target of net-zero emissions by 2050.
The preservation of Scunthorpe’s blast furnaces offers time and flexibility to pursue a more balanced transition. One promising avenue is hydrogen-based direct reduced iron (DRI) technology, which uses green hydrogen to produce steel with near-zero emissions. Sweden’s HYBRIT project, for example, has already demonstrated the viability of fossil-free steel production. Another approach is carbon capture and storage (CCS), which could significantly reduce emissions from existing blast furnaces.
To advance these technologies, the UK government must invest in R&D, pilot projects, and infrastructure upgrades. The estimated capital cost of converting a blast furnace to hydrogen-based production exceeds £1 billion, but the long-term benefits -in terms of climate leadership, industrial resilience, and strategic autonomy could justify the expenditure.
Photo by Nordroden / Shutterstock.com