UK to pass emergency laws to take control of British Steel

By Sarah Young and Alistair Smout

LONDON (Reuters) -Britain will pass emergency laws on Saturday to keep British Steel's blast furnaces open, aiming to save the country's steel-making capability and thousands of jobs, Prime Minister Keir Starmer said.

British Steel, owned by China's Jingye Group, employs 3,500 people at its Scunthorpe plant and supports more in the supply chain. It intended to immediately close the blast furnaces, which are losing 700,000 pounds ($914,760) a day, the government said.

"The future of British Steel hangs in the balance," Starmer said on Friday. "Jobs, investment, growth, our economic and national security are all on the line."

Parliament will be recalled to pass emergency legislation in one day to give the government the powers to do "everything possible to stop the closure of these blast furnaces", he said.

Asked by a reporter whether this was a precursor to nationalisation, Starmer said the government would "preserve all viable options".

"The step we're taking tomorrow is the step of taking control, because it's necessary now to do that," he said.

The output of Britain's last virgin steel maker is used in the rail network and the construction and automotive industries. Without the plant, Britain would be reliant on imports at a time of trade wars and geopolitical instability.

The lower chamber of parliament, the House of Commons, had been scheduled to be in recess until April 22. Such recalls only happen in extraordinary circumstances, such as in August 2021 when lawmakers were brought back to debate the withdrawal of troops from Afghanistan.

British Steel was already struggling in an over-supplied global market before it was hit by higher energy costs in recent years. U.S. tariffs of 25% on all imports of steel, which took effect in March, delivered another blow.

Jingye's intention to close the blast furnaces immediately came "despite months of negotiations in good faith and a generous offer of co-investment from the UK government of 500 million pounds", the government said in a statement.

The emergency measures would give the state the power to direct the company's board and workforce, ensure they get paid, and order the raw materials to keep the blast furnace running, the government said.

It had instructed managers to ensure the furnaces keep burning, and if they were dismissed for doing so against the orders of the Chinese owners, they would be reinstated.

Starmer said that while the industry was facing a new era of global instability, the government's concerns about the plant and negotiations to protect it had been running for years.

The government still wanted to find a private sector partner in the longer term, sources said, but keeping the plant operating was the immediate priority.

A spokesperson for British Steel declined to comment.

GREENER PRODUCTION

Questions about the Scunthorpe plant's future have come to a head after the government and British Steel failed to agree a funding deal to switch to a greener type of steel production.

The government had already earmarked 2.5 billion pounds for the industry and has said it would publish a strategy for the sector in spring 2025.

Funding to keep the plant running would come from this budget, the government said.

Britain was the world's biggest steel producer in the 19th century, but its industry has been in decline, hurt in recent decades by a glut of low-cost production globally and high energy costs.

More recently, the U.S. tariffs have sent shockwaves through the sector. Britain's steel exports to the U.S. are worth more than 400 million pounds a year, according to industry body UK Steel, or about 5% of total steel exports.

If British Steel were nationalised it would be the biggest state rescue since a number of banks were taken into government hands in 2008.

Less carbon-intensive electric arc furnaces, which make new steel from scrap, are being built in Britain at Tata Steel's Port Talbot site, following a government support package worth 500 million pounds.

The two blast furnaces at Port Talbot closed last year, and the new electric furnace will not start producing steel until late 2027 or early 2028.

($1 = 0.7652 pounds)

(Additional reporting by Catarina Demony, Alistair Smout and Sam TabahritiWriting by Paul SandleEditing by Kate Holton, Joe Bavier and Frances Kerry)