The UK government’s management of British Steel is a story in two distinct phases: the “emergency” and the “strategy.” The first phase began in April, when ministers “recalled parliament to take control” of the Scunthorpe plant, saving 2,700 jobs from a closure threat by its Chinese owner, Jingye Steel.
We are now entering the second phase. Business Secretary Peter Kyle is working on a long-term “steel strategy,” due in December, to decide the plant’s permanent future. He has now revealed his hand: he is “keen” on a transition to electric arc furnaces (EAFs).
This strategic phase, however, is being haunted by the costs of the emergency. Kyle confirmed that “hundreds of millions” from the £2.5bn steel fund—money intended for this new strategy—has already been spent just “to keep operations going” at British Steel and the insolvent Liberty Steel.
This “probably mean[s] less money for capital investment,” leaving Kyle with a depleted war chest to fund his new EAF plan. It also complicates the government’s ability to fund a “financially dubious” hydrogen (DRI) plant, which is seen as the only way to honor the original justification for the April rescue: preserving “primary steelmaking.”
The December strategy will therefore be a test of whether the government’s long-term vision can survive the short-term financial damage incurred by the rescue.