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The UK government has intervened to take control of British Steel after Jingye, the company’s Chinese owner, warned it would shut down the country’s last two blast furnaces.
It looks increasingly likely that the government will nationalise British Steel to protect 3,500 jobs at its flagship Scunthorpe site. But after decades of decline, does the UK steel industry have a long-term future?
Domestic steel production has collapsed over the past 50 years as a result of intensifying global competition, mounting cost pressures and chronic under-investment.
According to data from the Office for National Statistics, the economic output of the UK iron and steel industry has contracted 73 per cent since 1990, despite more than 60 per cent growth in UK manufacturing output overall.
High energy costs and efforts to decarbonise heavy industry have added to long-term financial pressures, leading British Steel to report daily loses of more than £700,000 last month.
The UK steel industry has warned that 25 per cent tariffs announced by the Trump administration have dealt a further “devastating blow” to the sector, which exported around £400mn of goods to America in 2023.
China’s rise as a steel superpower
Rapid economic growth in Asia has turbocharged steel production in recent decades, causing the UK to drop from the fifth-largest producer in the late 1960s to 26th in 2023.
Chinese companies now dominate global supply, accounting for 27 of the top 50 steel companies, according to the World Steel Association. Meanwhile, just three are headquartered in the EU and four in the US.
Chinese production has far exceeded domestic demand, creating a global glut of steel that pushed down prices and made it difficult for steelmakers in advanced economies to compete.
The pressure is particularly acute in the UK where electricity costs are 50 per cent higher than France and Germany due to high network charges and wholesale prices, according to UK Steel, the sector trade body.
Local impact of UK’s steel job losses
Preventing the collapse of British Steel will protect about 3,500 jobs at the company, the majority located at the flagship Scunthorpe plant in north Lincolnshire.
Steel manufacturing is still a key part of the local economy, accounting for almost 4 per cent of employment in 2023, according to the latest ONS data.
But Scunthorpe is one of the only parts of the UK’s industrial heartlands to still rely on steelworks as a key employer.
Only the Neath Port Talbot region in south Wales had a higher share of employment in steel manufacturing in 2023 at 8.6 per cent, but this is set to change after the decision to close its blast furnaces last year put up to 2,800 jobs at risk.
UK lags behind international peers
The collapse of the steel industry has left UK production far below levels in peer economies, with operating capacity equal to only a third of France and an eighth of Germany, according to data from Global Energy Monitor.
Maintaining domestic production is seen as a strategic priority for the government, with the UK at risk of becoming the only G20 country unable to make steel from scratch if the blast furnaces at Scunthorpe close.
Jonathan Reynolds, the UK’s business secretary, has said “it’s never been more important” to build domestic resilience in supply chains, adding that it was “in the national interest to help secure UK steelmaking for the future”.
