Britain’s race to take control of its last major steel plant from Chinese owner

Britain’s parliament is only recalled at times of national crisis. But when lawmakers were brought back from their Easter vacation last weekend, the cause was not a war, terror attack or the death of a monarch – but the potential closure of a steel plant in northern England. The government said the owner of the British Steel complex in Scunthorpe, the Chinese company Jingye, was prepared to cancel orders for the raw materials needed to keep its blast furnaces burning, a step that would leave Britain unable to make virgin steel for the first time since the Industrial Revolution. Parliament voted to take emergency control of the plant – and even reportedly used the police to deny Jingye staff entry to the site. Jonathan Reynolds, the business secretary, has said full nationalization of the plant is “likely,” meaning the government could soon have to run a complex and costly manufacturing operation – a task it has long outsourced to private, and often foreign, companies. Once a steel giant, Britain is now a minnow. It accounts for just 0.3% of global output and imports large quantities of the alloy to meet domestic demand. But the government’s hasty decision to take back control of the Scunthorpe plant, owned by Jingye since 2020, offers a snapshot of how countries like Britain are navigating an economically uncertain world: on the one hand, remaining committed to the globalization that US President Donald Trump is challenging; on the other, protecting industries that are judged too strategically important to leave to market forces. British Steel has changed ownership many times since it was privatized in the 1980s, but Jingye’s tenure has been particularly rocky. A glut of Chinese steel in the global market put pressure on the UK steel industry, where overheads, especially energy prices, are far higher than elsewhere. In March, Jingye said the Scunthorpe plant was losing £700,000 (around $926,000) a day, despite huge investment, making it “no longer financially sustainable.” Negotiations with the British government to keep British Steel afloat eventually failed. In an emergency debate in parliament on Saturday, Reynolds implied the company was prepared to sabotage the plant. “Its intention was to cancel and refuse to pay for existing orders” of iron ore and coal needed to keep the two furnaces running, he said, which would “have irrevocably and unilaterally closed down primary steelmaking at British Steel.” Because firing a cooled furnace back up is difficult and extremely expensive, Reynolds said the government could not “stand idly by while the heat seeps” from the United Kingdom’s last blast furnaces. After the British government took emergency control of the furnaces, Lin Jian, a spokesperson for China’s Foreign Ministry, on Monday said that Beijing hoped that Chinese companies investing in the UK would be treated “in a fair and just manner.” The British government gave a range of reasons for its intervention, which speak to the contradictory demands it is juggling. “What we’re seeing, I think, is incoherent reactions to events, in a context where the Labour government wants to appear to be more nationalistic,” David Edgerton, professor of modern British history at King’s College London, told CNN. The nationalistic turn has been some years in the making. Inspired by the CHIPS Act and Inflation Reduction Act of the Biden administration, Rachel Reeves, then in opposition and now the UK finance minister, dubbed her economic strategy “securonomics.” To prevent Britain being “buffeted by a world that has become increasingly uncertain,” Reeves proposed in a 2023 speech “rebuilding the industrial foundations” lost over decades of globalization. But the takeover of British Steel comes in circumstances not of the government’s choosing. Labour is due to publish its long-awaited industrial strategy later in the spring, setting out a plan for which industries it would protect, and how. The government will find it “irritating” that the steel crisis struck before it could outline its strategy, Sam Alvis, head of energy security at the Institute for Public Policy Research, told CNN. If Prime Minister Keir Starmer’s decision to take control of the plant had a hint of nostalgia (he said steel is part of Britain’s “pride and heritage”), it also reflects growing geopolitical concerns. As the US winds down its military footprint in Europe, steel – used in infrastructure and weapons – will be a key ingredient in the continent’s attempts to rearm itself. Labour’s decision may also have been prompted by shorter-term political concerns. The upstart hard-right Reform UK party, led by Nigel Farage, has called loudly for the plant to be fully nationalized. With local elections due in May, Labour was wary of the potential fallout over the 2,700 jobs that would have been lost if the plant shuttered. But critics have pointed out that concerns about job losses did not prompt the government to save Britain’s other large steel mill, at Port Talbot in Wales, where the blast furnaces closed last year, costing some 2,800 jobs. The plant is now in the process of transitioning to “greener,” electrically powered steel production. Taking control of the Scunthorpe plant “will set a precedent – and this is why they’ve been so reluctant to do this, either in this case or in the Port Talbot case,” Edgerton said. With other privatized industries also in a state of disrepair – from water to electricity to the railways – other sectors could soon come knocking, he said. A turning point? With full nationalization of British Steel “likely,” as Reynolds said, some in the country are asking whether Britain is turning its back on the economic orthodoxy that has persisted since Margaret Thatcher privatized key industries in the 1980s. Jeremy Corbyn, the ousted far-left former leader of the Labour Party, called during Saturday’s debate for the government to bring “the whole steel industry into public ownership,” making it finally “free from market forces.” But Edgerton cautioned against seeing the decision as “the beginning of a new sort of policy.” “I don’t think economic internationalism is being undermined in this case… because there aren’t going to be any controls on (steel) imports. It’ll just be a question of subsidizing production” at a single plant, he said. The decision also raises questions about Britain’s muddled China strategy. Former Prime Minister David Cameron heralded a “golden era” of British-Chinese relations and famously took President Xi Jinping for a pint in a 16th-century pub during a 2015 visit. But later, under former Prime Minister Boris Johnson, relations soured. Despite allowing the sale of British Steel to Jingye months earlier, Johnson’s government in 2020 banned the Chinese telecoms giant Huawei from Britain’s 5G network, citing security concerns. In power since last summer, Starmer is once more attempting to court China, although without Cameron’s enthusiasm. Having campaigned on a promise to restore economic growth, finance minister Reeves visited Beijing in January in a fresh push for Chinese investment. But the controversy over Jingye and British Steel risks putting Labour’s overtures on ice. In his comments Monday, Lin, the Chinese Foreign Ministry spokesperson, warned Britain to “refrain from turning economic and trade cooperation into political and security issues, lest it should undermine the confidence of Chinese companies in their normal investment and operation in the UK.”