The British government last week took full ownership of beleaguered steel major British Steel, a year after taking control of its Scunthorpe plant in Lincolnshire. At the time, the government had cited national security considerations, with Jingye, the former owner, saying it would have to close operations amid continued losses.
The move has reopened a broader debate over whether Britain’s decision to privatise British Steel nearly four decades ago ever resolved the structural problems facing its steel industry.
Over the weekend, Jingye accused the UK government of offering “almost zero compensation” for its investment, said it had begun consultations under the relevant bilateral investment agreements, and reserved the right to pursue international arbitration. China’s foreign ministry also criticised the move, warning that it could affect Chinese investor confidence in the UK.
A brief history of British Steel
The modern British Steel traces its origins to the British Steel Corporation, created in 1967 after Harold Wilson’s Labour government nationalised 14 of the UK’s largest steel producers. The corporation was privatised in 1988 as British Steel plc, before passing through a succession of owners, mergers and restructurings without resolving the industry’s underlying problems (see graphic).
Once closed, blast furnaces are difficult and costly to restart. Their closure would leave the UK without the ability to produce primary steel through the blast furnace route, even though other steelmakers would continue producing steel, largely by recycling scrap in electric arc furnaces.
That changed last week when the government moved from operating the plant to assuming ownership, arguing that retaining primary steelmaking capacity was a matter of national interest.
Why has British Steel struggled?
If every owner struggled, was ownership really the problem? David Bailey, Professor of Business Economics at the University of Birmingham, argues that British Steel’s repeated crises point to deeper structural problems.
“Whether under private, international or domestic ownership, the industry has faced the same underlying challenges: high industrial energy costs, unfair competition from dumped imports, inconsistent policy support, and a lack of long-term certainty for investment,” Bailey told The Indian Express.
He argued that ownership alone had never been “the decisive factor in securing the long-term future of the sector”.
These structural problems have been compounded by a difficult global market. According to the OECD’s Steel Outlook 2026, global steelmaking capacity has continued to expand much faster than demand, with excess capacity projected to reach 745 million tonnes by 2028.
China, which now produces more than half the world’s steel, has been the principal driver of this overcapacity. According to the OECD, generous state support and weak domestic demand have encouraged record exports, adding to price pressures faced by producers elsewhere.
In an analysis for academic thinktank UK in a Changing Europe, Bailey argues that international competition is only part of the story. Britain’s producers have also contended with high industrial electricity prices, ageing assets and an inconsistent industrial strategy.
Why did Scunthorpe matter?
The government has argued that Scunthorpe is strategically important because it houses the UK’s last blast furnaces producing primary steel from iron ore. Blast furnaces produce primary steel from iron ore, while electric arc furnaces primarily recycle scrap steel. Preserving this capability is a matter of national importance because Britain would otherwise lose the ability to make primary steel from iron ore domestically.
In his response to The Indian Express, Bailey said the transition to green steel would require “a long-term partnership between government, industry and workers”, backed by investment in low-carbon technologies and stronger demand for British-made green steel.
The transition is also costly. Tata Steel’s 2024 decision to replace the blast furnaces at Port Talbot with an electric arc furnace was backed by hundreds of millions of pounds in government support while leading to significant job losses. Unlike Scunthorpe, however, the government accepted that transition because Port Talbot was not Britain’s last remaining blast furnace site. Closing Scunthorpe’s furnaces would have left the UK without the ability to produce primary steel through the blast furnace route.
Why nationalise now?
Writing after the government’s 2025 intervention at Scunthorpe in her Substack essay Saving British Steel: Bailout or New Beginning? economist Mariana Mazzucato argued that the debate should not centre solely on ownership. Instead, she argued, governments should attach clear conditions to public investment so that intervention supports innovation, decarbonisation and industrial renewal rather than simply keeping existing production alive.
Mazzucato’s argument reflects a broader shift in industrial policy following the Covid-19 pandemic, supply-chain disruptions, the war in Ukraine and the push to decarbonise heavy industry. Across Europe, governments have become more willing to intervene in sectors they regard as strategically important.
For Britain, then, the question was no longer simply whether British Steel should remain privately owned. After decades of changing owners without resolving the industry’s underlying weaknesses, the government concluded that preserving the UK’s remaining primary steelmaking capability justified bringing the company back under public ownership.
British Steel's Basic Oxygen Steelmaking (BOS) plant in Scunthorpe, England. (Wikimedia Commons) 
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