Ministers should review the security implications of Chinese investment in all UK critical national infrastructure and supply chains in the wake of the British Steel saga, senior parliamentarians have urged.
Dame Emily Thornberry, Labour chair of the Commons foreign affairs committee, said UK intelligence agencies should examine Chinese investment in Britain’s nuclear, telecoms and transport sectors, after concerns about the conduct of British Steel’s Chinese owner Jingye.
She told the FT: “We should get advice on any Chinese investment. We should look at it all through a security lens . . . We ought to have the principle that it’s ‘security first’.”
Her intervention came after UK business secretary Jonathan Reynolds suggested at the weekend that the government would have to delineate which sectors were suitable for UK-Chinese co-operation and which were not.
Chinese companies are no longer welcome in the UK’s steel sector, he said, after the government intervened to take control of British Steel to prevent Jingye winding down the operations of the UK’s last two blast furnaces at a plant in Scunthorpe.
While the government hopes to find a private sector buyer for British Steel, Reynolds has admitted that full nationalisation is more likely.
Labour MP Graeme Downie, chair of the cross-party coalition on secure technology campaign group, said the episode had thrown the importance of supply chain resilience into sharp relief.
He said the security of technology that contains Chinese electronic wireless components and which is used in supply chains — ranging from refrigeration units to mobile payment terminals — should be examined.
Ministers must be alert to threats at the “level below what you would call critical national infrastructure . . . It’s [about] who owns assets, but also then supply chains”, Downie said.
Tan Dhesi, Labour chair of the Commons defence select committee, did not single out Chinese companies, but said: “British Steel must be seen as a watershed moment in assessing the security of our critical industries and ensuring they don’t fall victim to the whims of external actors.”
The government has promised to conclude its cross-Whitehall ‘China audit’ soon, charting all areas of Anglo-Chinese bilateral co-operation, but it remains unclear whether all of its findings will be made public.
Downing Street said on Monday there were no plans for a new inquiry into Chinese investments into Britain.
“We already have a very rigorous review system, particularly when it comes to our energy sector — all investments are subject to the highest national security scrutiny,” the UK prime minister’s spokesperson said, adding: “We will take a consistent, long term and strategic approach to China.”
Chinese companies, whether state-backed or private, are active across Britain’s energy industry, investing in assets and supplying hardware.
The Grangemouth oil refinery in Scotland is owned by Petroineos, a joint venture between PetroChina and Ineos.
In a situation echoing British Steel, Petroineos is planning to close the refinery in coming weeks due to financial losses. John Swinney, Scotland’s first minister, on Monday called for Grangemouth to also be taken into public ownership.
China National Offshore Oil Corp owns stakes in and operates major North Sea oil and gasfields, while state-backed China General Nuclear is a minority investor in the Hinkley Point C nuclear power plant being built in Somerset.
CGN also had a 20 per cent stake in the proposed Sizewell C nuclear power plant that EDF and the UK government are developing in Suffolk, but it was bought out by the government in late 2022 amid concerns about China’s role in critical national infrastructure.
China-based manufacturers dominate global supplies of large-scale batteries and solar panels, and are playing a key role in the UK’s plans to decarbonise its electricity sector by 2030.
On Monday Andrew Griffith, Tory shadow business secretary, said that “while talking about not being reliant on China for steel, the government are driving yet more dependency on solar, wind and batteries”.
The possibility of private China-based company Mingyang building a wind turbine factory in Scotland has stirred concern among some politicians.
Nick Timothy, a Conservative MP, last year said that ministers should rule out allowing turbines that “might be controlled by hostile states”.
However, Kate Forbes, Scotland’s deputy first minister, indicated that Scotland is open to potential investment from Mingyang, highlighting the significant requirements of the shift to cleaner energy.
The Labour government at Westminster has also signalled its interest in fostering deeper economic ties with Beijing following a period of froideur under the Conservatives, with Chancellor Rachel Reeves visiting China in January and Sir Keir Starmer planning a trip later this year.
Trade minister Douglas Alexander is currently visiting China and Hong Kong to promote British exports.
Any future attempt by the UK government to wind down Chinese investment in certain sectors in Britain could face legal challenges.
A 1986 bilateral investment treaty provides protection to Chinese companies investing in the UK, as is common for overseas investors.
This raises the possibility of the UK government being taken to the international arbitration courts over discriminatory treatment or nationalisation, said one person close to a consultancy. “Lawyers will be checking the legislation and the international treaties,” he said.
China’s foreign ministry has also issued a warning to the UK government not to use economic security to curb or politicise trade between the two nations.
“We hope the UK government will treat Chinese-invested enterprises in the UK fairly and impartially, protect their legitimate rights and interests, and avoid politicising or overstretching the concept of security in economic and trade co-operation,” said Lin Jian, a spokesperson for China’s ministry of foreign affairs, on Monday.
Nonetheless, pressure is growing on the UK government to take action.
Luke de Pulford, executive director of the Inter-Parliamentary Alliance on China, an international cross-party group of legislators, said: “What the Chinese Communist party is trying to achieve is market dominance and part of that is undermining the national infrastructure of other countries, especially where they might compete with them.”
He said successive UK governments had shown “astounding naivety” over Chinese investment in British nuclear, water and rail infrastructure.
Not everyone agrees, however. One adviser to international investors dismissed concerns that the Chinese were trying to sabotage the British Steel industry as a “conspiracy theory”.
In many cases where the Chinese are invested in UK assets they are “purely financial investors and are not involved in the day-to-day running,” the adviser added.
“Clearly you don’t want to become economically dependent on China and you don’t give the Chinese a stranglehold, but the question is whether as owners they can do strategic damage and there seems to be enough protection against that — as the bill put forward by the government on Saturday has shown.”
