My Lords, steel is a historic British industry at the heart of our national story. For generations, steelworkers have forged not only steel but Britain’s prosperity. From Scunthorpe to Sheffield, from Port Talbot to Teesside, steel communities have powered our industrial success, strengthened our economy and contributed immeasurably to our national life. For those communities, steel is far more than an industry; it is a source of pride, identity and opportunity. It is a way of life, built over generations through skill, dedication and enterprise.
However, steel is not only about our past; it is fundamental to our future. Steel underpins our infrastructure, manufacturing base, energy networks and transport system. It is essential to the homes, railways and power stations that we build and the defence capabilities on which our national security depends. Steel is therefore not merely another sector of the economy; it is a strategic national asset. Its future is central to our economic resilience, our industrial strength and our ability to deliver the growth and prosperity that this country needs.
The global steel industry faces profound challenges. The volatile geopolitical climate, intensifying international competition and significant global overcapacity have placed enormous pressure on steel producers worldwide. British producers face those challenges while contending with energy costs that remain higher than those of most of their many international competitors. Recent events have highlighted the fragility of global supply chains. The pandemic exposed vulnerabilities that many had assumed did not exist. Russia’s invasion of Ukraine reminded us that economic and national security are inseparable. Increasing geopolitical uncertainty has underscored the importance of maintaining domestic industrial capability.
My Lords, steel is a historic British industry at the heart of our national story. For generations, steelworkers have forged not only steel but Britain’s prosperity. From Scunthorpe to Sheffield, from Port Talbot to Teesside, steel communities have powered our industrial success, strengthened our economy and contributed immeasurably to our national life. For those communities, steel is far more than an industry; it is a source of pride, identity and opportunity. It is a way of life, built over generations through skill, dedication and enterprise.
However, steel is not only about our past; it is fundamental to our future. Steel underpins our infra- structure, manufacturing base, energy networks and transport system. It is essential to the homes, railways and power stations that we build and the defence capabilities on which our national security depends. Steel is therefore not merely another sector of the economy; it is a strategic national asset. Its future is central to our economic resilience, our industrial strength and our ability to deliver the growth and prosperity that this country needs.
The global steel industry faces profound challenges. The volatile geopolitical climate, intensifying international competition and significant global overcapacity have placed enormous pressure on steel producers worldwide. British producers face those challenges while contending with energy costs that remain higher than those of most of their many international competitors. Recent events have highlighted the fragility of global supply chains. The pandemic exposed vulnerabilities that many had assumed did not exist. Russia’s invasion of Ukraine reminded us that economic and national security are inseparable. Increasing geopolitical uncertainty has underscored the importance of maintaining domestic industrial capability.
I will continue. In developing this legislation, we have drawn heavily on the framework established by the Banking Act 2009, adapting well-established precedents, rather than creating entirely new mechanisms. The principal transfer powers are subject to a sunset clause and will expire two years after Royal Assent. This ensures that they remain in force only for as long as necessary to achieve their intended purpose. The Bill provides for compensation arrangements when powers are exercised. Compensation will be assessed independently, by a valuer appointed through an independent process. This ensures fairness, impartiality and proper protection for affected parties. The Government are committed to treating all investors fairly and consistently.
Many of the technical provisions contained within the Bill are designed to ensure that any transfer of ownership can be carried out smoothly and effectively. In practice, we are seeking through legislation to replicate many of the outcomes that would normally be achieved through a complex commercial transaction. That inevitably requires powers to address legal and operational issues arising from such transfers and to ensure continuity of operations. These powers are not novel; they follow established legislative precedent, and are solely intended to ensure that the legislation’s objectives can be achieved effectively.
The Bill is ultimately about the kind of country that we aspire to be. Do we believe that Britain should continue to produce the steel upon which modern economies depend? Do we believe that strategic industries matter? Do we believe that economic security, industrial resilience and national security are worth safeguarding? Do we believe that steel-making communities deserve a future? The Government’s answer to each of those questions is yes. The Bill demonstrates our resolve to safeguard a strategically important industry. It demonstrates our commitment to safeguarding jobs, supporting communities and securing Britain’s industrial future. It demonstrates that this Government are prepared to act decisively when the national interest demands it.
My Lords, I start by congratulating the Minister on his appointment last Friday as Parliamentary Under-Secretary of State at the Department for Business and Trade. He has a long established and proven track record of success in business. I hope that his voice will be heard loud and clear within government. I wish him well and hope that he will emerge from our debates with his reputation enhanced.
At the outset of this debate, I make it clear that my party accepts that steel is a strategic industry. Steel helped to build our past and I agree with the Minister that it will shape our future. It matters to our national resilience, to our defence capability, to our manufacturing base, to our construction sector and to communities right across the country. Recognising the importance of steel is not, however, the same as accepting that nationalisation is the necessary answer. The central issue facing the sector is competitiveness, and the Government have still to set out a credible plan to address just that.
Last week, Al Carns, who was then Minister for the Armed Forces, resigned from the Government. He has since argued that energy policy has to be treated as a matter of security, but high energy costs are making British steel less competitive globally. The Government’s chosen path towards lower carbon production will dramatically increase the sector’s reliance on electricity and therefore require very substantial capital investment. The industry itself has warned that high electricity prices risk undermining its long-term plans to decarbonise. The Government acknowledge that steel is vital to national security. If that is the case, surely the energy policy upon which steel depends must also be judged through the lens of national security, resilience and industrial capability.
My Lords, I thank the noble Lord, Lord Leong, for introducing this debate, and I too congratulate him on his well-deserved appointment as a Minister. This Steel Industry (Nationalisation) Bill is a government Bill, and it will provide powers to nationalise any company involved in steel manufacturing where that is in the public interest. But we know the focus of the Bill is the potential nationalisation of British Steel Ltd, a company currently owned by the Chinese company, Jingye Group, and subject to ongoing government financial assistance, and it is still operating.
The Government said in May—last month—that they were minded to nationalise the company. This was cautiously welcomed, including by the local community in Scunthorpe, but concerns have been raised about the significant cost and complexity of nationalisation. Of course, the Chinese Government have urged the UK to act prudently and said that they would protect Chinese business. The Conservative Party, as articulated by the noble Lord, Lord Hunt, very clearly just now, has set out its opposition to the Bill, and stated that it does not address the problems affecting the industry, which I will address.
The company, Jingye Group, operates the only remaining blast furnace for steel, in Scunthorpe. This is the country’s only remaining production capacity for making virgin steel. If the blast furnaces are switched off, it can be very difficult and costly to ever return them to operation. The company was preparing to close down the furnaces, and noble Lords will remember that last year Parliament was recalled—something that very rarely happens. We passed emergency legislation, the Steel Industry (Special Measures) Act 2025, which gave the Secretary of State the power to intervene in steel undertakings—and that is exactly what has happened.
My Lords, I too offer my warm congratulations to my noble friend the Minister on his appointment. I strongly welcome this Bill for the simple reason that our country must have a sovereign capability to make steel, and I commend the Government on acting swiftly. Taking powers to nationalise in the public interest is an essential tool of a modern industrial policy. We have done it before. In 2009, with cross-party support, similar powers were taken to stabilise the banking and finance industry. If we can bail out bankers, we can certainly support our steel-workers.
Steel is a vital part of our economy, as we have heard. Critical infrastructure such as roads, bridges, defence capability, hospitals, schools, housing and wind turbines all rely on steel. Some would add to that list Wembley Stadium, which was built with British steel. In today’s world, we cannot afford to leave ourselves at the mercy of China dumping cheap steel on the global market or the United States playing a capricious game on tariffs. Nor can manufacturing depend on supply chains left vulnerable by wars made in Moscow or Washington, so the Bill is essential for our security.
Many other advanced economies recognise the value of a mixed economy and the important role that state intervention and ownership can play. Germany, France, Italy, Belgium, Spain, China and India already provide major state aid to their steel industries. The state can intervene not just to correct market failures but to accelerate industrial success. It can both protect and grow firms of strategic importance and, for good measure, lift skills, living standards and whole communities.
The Opposition once recognised that. In 1971 a Conservative Government led by Ted Heath, admittedly somewhat reluctantly, nationalised a strategically important firm that was on the brink of bankruptcy. It was called Rolls-Royce. Some mounted the same arguments against nationalisation back then that we hear from some quarters today: that it was too expensive or that government should not bail out so-called lame ducks. History records that under state ownership, Rolls-Royce produced a new generation of engines that were a huge commercial success. It was only 16 years later that Rolls-Royce was sold off alongside a good deal of the nation’s family silver, including, of course, the national grid. Over subsequent years, bill payers and taxpayers have paid a high price for that 1980s dogma of privatisation. Now the steel industry is at a crossroads.
My Lords, I congratulate the Minister on his appointment. I am also very grateful to the Minister for his honest account of this legislation, where he made it very clear that it is very likely that the strong powers in this legislation will be used sometime soon fully to nationalise the Scunthorpe works. That, I think, makes it even more curious that the Government he represents have given us an impact assessment with no numbers in it at all, no account of what a nationalisation of the Scunthorpe works would look like, what impact it would have on the public budgets, what impact, as my noble friend Lord Hunt said, it would have on the £2.5 billion allocated for steel as a whole, and no account of how it would be a transfer of money we thought had been allocated for capital investment and modernisation in creating something new to the purpose of paying losses on a very old plant whose future is very uncertain. During this debate and over the course of this Bill, I hope we can get some numbers from the Government.
When the emergency legislation went through a year ago, I think both Houses of Parliament understood that the Government were not then in a position to produce numbers, but at that point, in those debates in both Houses, strong voices said, “There must be a business plan; there must be budgets”, and we were told at that stage that these would be forthcoming in relatively short order—but we await them. We still have a menu with no prices. We still have a lack of information about what the business plan of a nationalised Scunthorpe would look like, just as we have travelled for a year with a Scunthorpe that is run by the state and paid for by the state, but not owned by the state, making enormous losses which, according to the press, have been running at £1.3 million a day. We were offered no explanation of how long this might go on, when those green shoots the Minister reports will actually translate into real cash, how much steel this plant needs to sell and at what kind of prices before it can have a positive margin or before it can maybe halve the negative margin which it has been running at for all too long. Indeed, we were told at the point when the state took on these mighty obligations that, under the previous Chinese owners, it had been losing about £700,000 a day, so if the more recent press stories are right, the losses have clearly been considerably worse over the last year.
My Lords, I congratulate my noble friend Lord Leong, both on his ministerial appointment and on his opening speech. I also give full support to the Government for doing their best to protect and modernise a strategic industry that has suffered from past failures to adapt and from short-termism and lack of courage by successive Governments.
It was not the workers who let the side down or the communities who depended on them. These are tough jobs and tough people. My brother-in-law, Don, worked in the steel industry in Scunthorpe for most of his working life. I was there to celebrate his 90th birthday two years ago and he is still soldiering on. As I said, these are tough people.
We could spend a lot of time analysing how we got to this position, how much steel is stuck in the Strait of Hormuz, tariff imposition by the USA, and whether Europe is doing any better. We could pore over the comments by the Chinese Commerce Ministry when it called on our Government to
“respect the wishes of firms and market principles and avoid the abuse of administrative coercive measures”.
We could compare that with Chinese state aid and anti-competitiveness practices. We could score points on all of these things, together with overcapacity, cost and the complexity of the issues, but none of it would preserve a strategic industry or save a single job.
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The lesson is clear: a modern industrial nation cannot afford to lose the capability to produce the materials on which its economy and security depend. Without intervention, the United Kingdom faces the prospect of being the only G7 nation unable to produce virgin steel from raw materials within its borders. That would be more than an industrial failure; it would represent a strategic vulnerability. That is why in March the Government published The UK Steel Strategy, setting out a commitment to revitalise the steel sector, restore domestic production to sustainable levels and secure the industry’s long-term future.
The strategy recognises that the Government have a vital role to play. It means tackling the drivers of high operating costs, including reducing industrial energy costs. It means maintaining a robust trade defence regime to protect British producers from unfair competition. It means working alongside industry to secure the investment that is needed to modernise and decarbonise steel production. It means ensuring that where strategically important steel-making assets are at risk, government has the tools necessary to act decisively in the national interest.
That brings me to the Bill before the House today. This Bill establishes a framework that enables the Government, where necessary and justified by the public interest, to bring steel undertakings into public ownership. This is an enabling measure. It provides the Government with the ability to intervene where strategic domestic steel-making capability is at risk and where such intervention is necessary to safeguard the national interest. As the Prime Minister has already made clear, the Government are strongly minded to use these powers in relation to British Steel, subject, of course, to the public interest test set out in the legislation.
The circumstances surrounding British Steel and the Scunthorpe steelworks are well-known to the House. Scunthorpe is the last remaining primary steel-making capability in the United Kingdom. It directly employs approximately 2,700 highly skilled workers and supports many thousands of additional jobs throughout the wider supply chain. The Government took decisive action last year under the Steel Industry (Special Measures) Act 2025 to prevent the premature and disorderly closure of the blast furnaces at Scunthorpe. I would like to place on record my gratitude to noble Lords across the House for their constructive and responsible engagement with that legislation. I pay tribute to the parliamentary staff whose efforts enabled Parliament to respond swiftly to an urgent national challenge.
The measures enacted last year served their immediate purpose. They prevented closure and ensured continued production. However, those powers were always intended to be temporary. Although they have enabled continued operation, they do not provide the flexibility required to undertake the longer-term restructuring, investment and modernisation that the business now requires. As matters stand, the Government believe that public ownership offers the most effective way to secure the company’s future and to enable strategic decisions to be taken in the long-term interests of the business, its workforce and the nation.
However, I emphasise that any decision to nationalise remains subject to the public interest test as set out in the Bill. The Government did not reach this position lightly. We engaged constructively and extensively with Jingye to pursue a commercial solution. Our clear preference was to secure the future of steel-making through agreement rather than through intervention. However, despite extensive negotiations, it has proved impossible to reach an agreement that would represent a responsible and proportionate use of taxpayers’ money. In those circumstances, the Government concluded that legislation was necessary.
Some noble Lords may reasonably ask whether nationalisation is the right answer. The Government’s response is straightforward. Nationalisation is not an ideological aim and it is not the first option either. It is a pragmatic tool available for use when the national interest requires it. The costs of losing our steel-making capability would far outweigh the costs of preserving it. Once blast furnaces are extinguished, once supply chains disperse and once specialist skills are lost, rebuilding those capabilities becomes extraordinarily difficult and expensive. Inaction carries consequences and dependency carries risks. The loss of sovereign industrial capability carries costs that cannot be easily measured in purely financial terms. That is why Governments around the world intervene to protect strategically important industries. Britain should be no different.
We believe that British Steel can succeed. With the right leadership, investment and long-term strategy, the company can be transformed. We have already seen the success of public ownership in the case of Sheffield Forgemasters. Recently, British Steel has secured important new contracts, including supplying rail infrastructure and supporting future energy projects. These are encouraging signs of the opportunities ahead.
Turning to the detail of the Bill, I recognise that it contains significant powers and that noble Lords will wish to scrutinise them closely. That scrutiny is both expected and welcome. The Government have consistently sought to ensure that the powers contained in the Bill are proportionate, necessary and appropriately constrained.
The lesson is clear: a modern industrial nation cannot afford to lose the capability to produce the materials on which its economy and security depend. Without intervention, the United Kingdom faces the prospect of being the only G7 nation unable to produce virgin steel from raw materials within its borders. That would be more than an industrial failure; it would represent a strategic vulnerability. That is why in March the Government published The UK Steel Strategy, setting out a commitment to revitalise the steel sector, restore domestic production to sustainable levels and secure the industry’s long-term future.
The strategy recognises that the Government have a vital role to play. It means tackling the drivers of high operating costs, including reducing industrial energy costs. It means maintaining a robust trade defence regime to protect British producers from unfair competition. It means working alongside industry to secure the investment that is needed to modernise and decarbonise steel production. It means ensuring that where strategically important steel-making assets are at risk, government has the tools necessary to act decisively in the national interest.
That brings me to the Bill before the House today. This Bill establishes a framework that enables the Government, where necessary and justified by the public interest, to bring steel undertakings into public ownership. This is an enabling measure. It provides the Government with the ability to intervene where strategic domestic steel-making capability is at risk and where such intervention is necessary to safeguard the national interest. As the Prime Minister has already made clear, the Government are strongly minded to use these powers in relation to British Steel, subject, of course, to the public interest test set out in the legislation.
The circumstances surrounding British Steel and the Scunthorpe steelworks are well-known to the House. Scunthorpe is the last remaining primary steel-making capability in the United Kingdom. It directly employs approximately 2,700 highly skilled workers and supports many thousands of additional jobs throughout the wider supply chain. The Government took decisive action last year under the Steel Industry (Special Measures) Act 2025 to prevent the premature and disorderly closure of the blast furnaces at Scunthorpe. I would like to place on record my gratitude to noble Lords across the House for their constructive and responsible engagement with that legislation. I pay tribute to the parliamentary staff whose efforts enabled Parliament to respond swiftly to an urgent national challenge.
The measures enacted last year served their immediate purpose. They prevented closure and ensured continued production. However, those powers were always intended to be temporary. Although they have enabled continued operation, they do not provide the flexibility required to undertake the longer-term restructuring, investment and modernisation that the business now requires. As matters stand, the Government believe that public ownership offers the most effective way to secure the company’s future and to enable strategic decisions to be taken in the long-term interests of the business, its workforce and the nation.
However, I emphasise that any decision to nationalise remains subject to the public interest test as set out in the Bill. The Government did not reach this position lightly. We engaged constructively and extensively with Jingye to pursue a commercial solution. Our clear preference was to secure the future of steel-making through agreement rather than through intervention. However, despite extensive negotiations, it has proved impossible to reach an agreement that would represent a responsible and proportionate use of taxpayers’ money. In those circumstances, the Government concluded that legislation was necessary.
Some noble Lords may reasonably ask whether nationalisation is the right answer. The Government’s response is straightforward. Nationalisation is not an ideological aim and it is not the first option either. It is a pragmatic tool available for use when the national interest requires it. The costs of losing our steel-making capability would far outweigh the costs of preserving it. Once blast furnaces are extinguished, once supply chains disperse and once specialist skills are lost, rebuilding those capabilities becomes extraordinarily difficult and expensive. Inaction carries consequences and dependency carries risks. The loss of sovereign industrial capability carries costs that cannot be easily measured in purely financial terms. That is why Governments around the world intervene to protect strategically important industries. Britain should be no different.
We believe that British Steel can succeed. With the right leadership, investment and long-term strategy, the company can be transformed. We have already seen the success of public ownership in the case of Sheffield Forgemasters. Recently, British Steel has secured important new contracts, including supplying rail infrastructure and supporting future energy projects. These are encouraging signs of the opportunities ahead.
Turning to the detail of the Bill, I recognise that it contains significant powers and that noble Lords will wish to scrutinise them closely. That scrutiny is both expected and welcome. The Government have consistently sought to ensure that the powers contained in the Bill are proportionate, necessary and appropriately constrained.
Today, we have an opportunity to send a clear signal to steelworkers, investors, industry and the country that Parliament is committed to preserving and strengthening Britain’s steel-making capability for generations to come. I look forward to the contributions that noble Lords will make during this debate and to the constructive scrutiny I know this House will bring to the legislation. I beg to move.
The Government came to office promising a £2.5 billion steel fund—a fund that was supposed to transform the sector, modernise production, support new technology and crowd in private investment. There is now a real risk that that money will be used not to transform British Steel but simply to plug the losses created by the Government’s failure to address the underlying causes of uncompetitiveness.
If hundreds of millions of pounds are being spent merely to keep British Steel operating day to day, and if still more liabilities are now to be brought on to the public balance sheet through nationalisation, how much of that £2.5 billion will be left for genuine transformation? How much will remain available to support new technologies, energy-efficiency improvements and the investment needed to secure the industry’s long-term future?
This leads to a more fundamental question: where does this end? Will British Steel, under public ownership, be expected eventually to stand on its own two feet, or will taxpayers be asked to fund operating losses year after year, while Ministers continue to promise that help is just around the corner? Before Parliament grants these powers, surely it is reasonable to ask what the end state is, what the exit strategy is and how the Government intend to measure success beyond simply writing more and larger cheques.
The Government’s impact assessment makes it clear that the costs of this Bill will be substantial. These costs include the possibility of capital injections, working capital support, operating costs if the company remains loss making, compensation, administrative overheads, and the expenditure inherent in establishing and running a government-owned company. So I ask the Minister what the Government’s estimate of the total cost is. Will Parliament be told that figure before the Bill receives Royal Assent?
We must also question the Government’s approach to ensuring environmentally friendly steel. Ministers have chosen a pathway that the industry warned will be more costly, more electricity-intensive and thus more difficult to finance. In the other place, the Secretary of State Peter Kyle said that
“the long-term future of the UK steel sector relies on public and private investment”.—[Official Report, Commons, 21/5/26; col. 787.]
If the Government’s preferred model drives up costs and makes the United Kingdom less attractive than competitor countries not operating under the same net-zero constraints, where is that private investment supposed to come from? Investors can choose where they deploy capital; if the Government make steel production more expensive, more regulated and more politically uncertain, they will look elsewhere.
The Government’s impact assessment of 13 May is clear and explicit about the risk to investment. I quote its paragraph 75:
“One potential impact is a chilling effect on investment as investors may perceive an increased risk of government intervention. This could increase uncertainty for investors and therefore deter future investment in the UK steel sector. If investors perceive these risks as material, they could further undermine the recovery of the sector, putting jobs and capabilities at risk”.
This is a remarkable admission from any Government.
The Government have also not properly addressed the wider trade risk. If British Steel is to be subject to constant and persistent subsidisation at the expense of the taxpayer, Ministers must explain how they intend to ensure that this remains compliant with the United Kingdom’s international obligations. Prolonged state support, if not carefully structured, could risk challenge under WTO subsidy rules and invite countervailing measures from trading partners. That would not be a theoretical concern; other countries could impose countervailing duties, raise disputes or just take other retaliatory action if they believe that UK steel is being unfairly subsidised.
Such action could not only harm British Steel itself but damage the wider UK steel sector and the downstream industries that rely on steel inputs, including automotive, aerospace, defence, construction and advanced manufacturing. Can the Minister therefore tell the House what assessment the Government have made of the WTO implications of the Bill and of any continuing public subsidy to British Steel? Have Ministers had any discussions with the World Trade Organization or major trading partners about the proposed structure of support? What conversations do they intend to have before any transfer into public ownership takes place?
On the issue of trade, I also raise the significant concerns expressed by stakeholders across industry about the Government’s steel strategy and, in particular, their tariff policy. The Government appear to have conducted a partial U-turn: it seems that we did not need to wait 12 months for a formal review for Ministers to discover that tariffs can be harmful—if only more than a century of economic history had already taught us that.
The first point is one of parliamentary accountability: any change to the Government’s steel tariff regime should be reported to Parliament first, so why are Members of both Houses having to learn through the media about possible changes? That is just not acceptable, and it gives the impression of a Government making up policy in response to headlines rather than setting out a coherent and properly examined trade strategy.
We have already seen the risks of retaliation. We have seen concerns in relation to the United States and questions raised on India, including the possible implications for the trade deal. We now read of concerns about the European Union, with reports that the Secretary of State has been to the EU to plead with it not to reduce tariff-free imports of British steel. What did the Government expect? If the UK chooses to escalate protectionist measures, it should not be surprised when trading partners respond in kind. Retaliation was not unforeseeable; it was predictable. We saw the European Union respond in precisely this way to President Trump’s tariffs. Did the Government really fail to assess that risk before introducing their own regime?
Countermeasures, reduced market access and increased uncertainty could all make it much harder for UK producers to export, and harder for investors to commit capital. At the same time, tariffs risk raising costs for downstream sectors that rely and depend on steel inputs —metal forming, automotive, aerospace, construction, defence and advanced manufacturing among them. These sectors are central to growth, productivity and investment. If tariffs increase their costs, reduce their competitiveness or force them to source elsewhere, the Government will have weakened the very industrial base they claim to be trying to strengthen.
I therefore ask the Minister: what assessment has been made of the impact of the steel tariff regime on downstream manufacturers? What assessment has been made of possible or likely retaliation by trading partners? Why should British businesses have confidence in a strategy that appears to protect one part of the supply chain by imposing costs and risks on so many others? We cannot just ignore the wider business climate the Government have created.
I am not going to go into detail about the Employment Rights Act 2025, but that will not stop me raising it, because it is making the business environment less competitive and less conducive to investment. Combined with those increased national insurance contributions, endless reporting requirements and carbon taxes, the Government are damaging the steel sector, along with every other sector of the UK economy. For a steel sector already operating under intense global pressure, these additional costs affect hiring, investment, margins, productivity and the ability of British steelmakers to compete. In the light of the importance to our national security, the steel sector may be a special case, but that does not mean it is immune to the effects of wider government policy.
Many questions remain to be answered. At this point, His Majesty’s Opposition are far from convinced that nationalisation is the best option, or even the so-called least worst option, but we are eager to hear some, or better still all, of those questions answered as the Bill progresses. Steel has shaped our nation’s history. The challenge now is to secure a future for the industry that is internationally competitive, financially sustainable and attractive to investors.
The result is that the production plant at British Steel is still producing. The Government have stated that they now want to modernise and co-invest with the private sector. The Minister for Industry, Chris McDonald, set out the details and said that government officials would continue to provide on-site support. To date, the Government have spent almost £0.5 billion on working capital to support British Steel. Can the Minister confirm that? When it comes to modernising and decarbonising, and providing stability for workers, suppliers and customers, the Government recognise that that will require both public and private investment. Can the Minister confirm that?
Then there is the impact assessment that was carried out for this proposal. It said that the 2025 Act provided only short-term emergency powers and did not allow for the longer-term planning or investment required. It also said that the powers could create fear among investors and put off UK investment in the sector—owing to, for example, concerns about government intervention —and that this could undermine jobs and attempts to develop the sector. Will the Minister acknowledge that aspect?
The impact assessment also said that, on the other hand, the powers could have a positive impact on supply chain confidence and reduce uncertainty, boosting investment in jobs in the sector, and that they could have wider impacts on supporting and stabilising the economy and jobs. Overall, the impact assessment said that the socioeconomic benefits were likely to outweigh the associated costs, and that there would be a post-implementation review within five years. There is now the beginning of a clear and credible long-term plan for British Steel, with low-carbon steelmaking as a priority.
An important point from a legal perspective was made by Peter Ware, who is a partner and head of the government sector at the law firm, Browne Jacobson; I have to declare my interest, as I have worked with this firm in my business. He described this as
“one of the most significant acts of state intervention in British industry in decades”,
and said that it would raise
“substantial questions that will need careful navigation”,
including on compensation and the transfer of employees. Will the Minister acknowledge this?
Of course, there are underlying sovereignty concerns that losing the Scunthorpe furnaces would, as the Minister said in his opening speech, leave the UK as the only G7 country unable to make steel from raw materials, and dependent on imports for a material central to defence and infrastructure. I am co-chair of the India All-Party Parliamentary Group, and the UK signed the CETA with India—its FTA—last July at Chequers, with implementation due any time soon. There was a pitch to Indian capital, yet the Bill contains a discretionary power to seize a foreign-owned steelmaker. That is scary to any potential investor and sends the opposite signal to the Vision 2035 partnership at the worst possible moment, when we are about to implement the CETA.
Also to do with India, there is Tata, India’s flagship industrial investor in the UK, with Jaguar Land Rover and of course the £1.25 billion investment in Port Talbot’s electric arc furnace, which the Government have supported with £500 million of grants to save 5,000 jobs. The Bill defines a “steel undertaking” generically. Can the Minister confirm that the Government’s intentions are to do with Scunthorpe and not to do with Tata? Having secured Tata’s £1 billion commitment, the UK is handing itself a power to expropriate that same asset in the public interest, and that is quite scary.
Moreover, when it comes to compensation and the valuing of the business—this needs to be taken into account—nil compensation could be awarded. This is something the Government could do. Tata’s entire transition therefore rests on government co-investment. If the state can seize the asset and value it, but for the support of the UK Government, the inbound investment is worth little or nothing. This is really very scary to a country we have just signed a free trade agreement with—a country with which we are hoping to double our bilateral trade from nearly £50 billion to £100 billion by 2030.
Peter Ware of Browne Jacobson again said:
“The compensation question is particularly complex: with the government having already committed over £400mn in working capital, Jingye’s scope to claim substantial compensation may be limited, but legal challenges under bilateral investment treaties or domestic property rights principles cannot be ruled out”.
Will the Minister acknowledge this?
Shevaun Haviland is the director-general of the British Chambers of Commerce. I chair the International Chamber of Commerce UK; we are the regional co-ordinators for Europe, and she sits on the board of the ICC UK. She warned of
“significant financial and logistical problems”
from planned tariff changes, cautioning that revised quotas and tariffs risked
“economic damage in key supply chains”
for sectors such as car-making, aerospace and medical technology.
Can the Minister please clarify the rumours circulating in the press that India may reduce tariff concessions for the UK due to steel tariffs jeopardising the FTA that we have signed and that this FTA should be separated from any issues to do with steel? That would be really reassuring to hear.
On top of this, we have the backdrop of US tariffs and the UK’s high energy costs. The Government announced their much-delayed steel strategy focused on reworking trade quotas designed to protect steel majors from a glut of Chinese imports. Before that, Tata Steel—I do not want to miss this point—had broken ground with £500 million of government backing, which is going to be a pivotal moment in UK steel-making in future. It is expected to cut the site’s carbon emissions by 90%, thanks to the £500 million help from the Government that will save 5,000 jobs. Tata Steel says it is paramount that how it operates and what it is doing should be a distinguishing fact versus what is happening with UK Steel in Scunthorpe. We need clarification that these powers are not going to be implemented for a company such as Tata.
Domestic demand is a challenging opportunity. The UK steel industry now supplies only 32% of the UK’s overall steel demand. Will the Government commit to a minimum threshold of 30% domestically produced steel? On top of this—this is a point that the noble Lord, Lord Hunt, mentioned—the UK’s energy prices are some of the highest in the world and certainly the highest in Europe. I will give some facts. UK steel producers face an average electricity price of £66 per megawatt hour, compared with Germany at £50 and France at £43. We pay up to 50% more than our main competitors right at our doorstep in Europe.
On top of that, steel is a highly traded commodity. I am chair of the ICC UK and regional co-ordinator for Europe. Our expertise is in trade. Our competitors in Europe have successfully accessed government grant funding of 50% and more for major operational changes. China’s steel subsidies are more than 10 times higher than those of OECD countries and more than five times those of non-OECD economies. Steel subsidies in non-OECD countries are 42% higher in terms of cash grants, and 11 times higher with respect to below-market borrowings than in OECD countries. How do we create a level playing field when we are facing this sort of competition worldwide?
On the other hand, there are great opportunities. Renewable energy infrastructure presents a huge opportunity for the UK steel market. One report shows that just the offshore wind pipeline will require 25 million tonnes of steel by 2050, with a potential value of £21 billion to the UK steel market over the coming decades, which will be great for our British steel industry. This reinforces that we need to have that 30% minimum threshold.
We are paying more than 50% more for our electricity than our counterparts in France and Germany. When it comes to facing excess steel-making capacity, the gap between global capacity and crude steel production in 2023 was estimated at 543 million tonnes. That is 70 times the size of the UK market. Exports from China this year are expected to reach 100 million tonnes, the highest since 2016, when the last steel crisis saw several steel plants close and thousands of jobs lost in steel-making countries around the world, including the UK. On top of that, there is the effect of the US tariffs. Tata Steel, for example, exports about 170,000 tonnes of products to the US. Those products are not made in the US. They can come only from us, so the US needs what we produce.
There is no question: we cannot compete on costs with producers in China and across Asian markets. They have lower environmental regulations and cheaper carbon-intensive energy and labour costs. It is very difficult. On top of that, UK steel producers face higher network charges despite the Government’s recent announcement of a 60% exemption for charges starting in April last year. Germany produced a 90% exemption and France 80%, so we could do more. Can the Government do more to help our industry?
My last two points are about research and development and innovation. Tata Steel spends around £10 million to £15 million in R&D and collaborates with universities such as Warwick, Swansea, Cambridge, Sheffield, Cardiff and Imperial College. We must encourage more of this research and development between our industry and universities. On skills, we need core capabilities in engineering, metallurgy, safety, sustainability, leadership, advanced digital, green skills and AI.
To conclude, I have the privilege of chairing the Manufacturing Commission, which is the research arm of the All-Party Parliamentary Manufacturing Group. Although manufacturing was 30% of GDP in the 1970s and has now gone down to less than 10% of GDP, the UK is still the sixth-largest economy in the world and the 11th-largest manufacturer in the world in absolute terms. It is, most importantly, high-quality manufacturing that we are proud of. Steel is a vital part of our manufacturing industry. We must do all we can to ensure that our steel industry continues to flourish and prosper.
According to More in Common polling last year, the public think that the Government should take state control of the wider steel industry. More than half the public support this, with only 13% opposing. Support for public ownership of British Steel is even higher. Roy Rickhuss, chair of the National Trade Union Steel Co-ordinating Committee, and a former steel worker himself—in fact, I think he is also the son of a steel worker—backs this Bill. Gareth Stace, director-general of the trade association UK Steel, strongly backs it too. They agree that, without support, our steel industry risks falling further behind international competitors, but with state backing British Steel can become a global leader once again.
Let us be clear: we owe our steel workforce. Their vital work is hard, and it can be dangerous, so we owe them respect for their skill and resilience, but, most of all, we owe them respect for their sheer determination to see a successful and sustainable future for their industry and for their communities.
In conclusion, I would welcome my noble friend the Minister’s views on the following. First, I agree that we need to deliver competitive energy prices. Can he tell us what additional support there will be for energy-intensive industries, including progress being made to speed up and scale up grid connections? Secondly, we must match the ambition of other countries’ investments in green steel production and ensure a just transition for workers. Can the Minister update us on discussions with the steel industry and trade unions to develop a just transition plan, and does the Minister agree that all technological options need to be on the table? Thirdly, can the Minister comment on the need to introduce robust climate measures to protect us from dirty steel imports, and on progress to mandate the procurement of UK-made steel for defence, energy and major infrastructure projects, including a clear forward pipeline to encourage long term investment?
Finally, in this House I have previously asked about the Government’s assessment of the impact on UK manufacturing of the EU Industrial Accelerator Act. I would add to that question another one on the impact on UK steel of the European Union’s plans to cut tariff-free quotas by 47%, to double tariffs from 25% to 50% and to impose melt-and-pour requirements. I would be very grateful if the Minister could provide an urgent update on the reset negotiations, and other discussions with the EU on these specific matters, either now or by letter.
I understand that the Minister cannot firmly say they are definitely nationalising because they have put in this public interest test and they obviously have not yet applied the test to any project to nationalise which they are currently planning. However, reading how wide the public interest test allows the Government to be in order to satisfy themselves, I do not think it is any actual prevention of the nationalisation of Scunthorpe. I am sure they are quite clever enough to come up with a plan that is well within the details of the public interest test, widely drawn as it is in this piece of legislation, so I do not think that is a reason for not giving us proper figures.
I think it would also be good, over the course of this Bill’s debates, if we could hear a more honest statement to the workforce of Scunthorpe, because the Government say two different things. They tell the press and the rest of us—and we are very relieved to hear it—that they have saved the jobs, but then the Government still seem to be wedded to a net-zero strategy, which says that all blast furnaces of the Scunthorpe type have to close—and they are the only two left—to be replaced by electric arc furnaces. Therefore, if that is still the plan, we need to be told that honestly, and the workforce needs to be told that, because, of course, there will be a very big reduction in the numbers of people working, should they switch from blast furnaces to electric arc furnaces in the case of Scunthorpe, as the Welsh steel industry discovered when the previous Government went on that journey, carried on by this Government, to replace those blast furnaces with electric arc furnaces.
Ministers should have a personal interest in wishing to get beneath the numbers and work out how much it is going to cost, not just because of pressures on public budgets and the need to assess this against alternative ways of spending the money, but also because we read that, when the initial transfer of the liabilities and the running of the plant was made to the state, the senior civil servants apparently said to the Secretary of State and Ministers that they were not able at that point to sign off that this was value for money. They were not able to sign off that it was definitely going to be a policy that was going to work. They were not saying it definitely would not work: I think they were saying they did not have enough time and it would require a lot of very detailed work and consultation.
Ministers used their right to issue a direction to the Civil Service to say, “We think the public interest is such that this is urgent, and so we are going to ignore the absence of sign-off on value for money and on the efficacy of the policy because it is worth a shot and we, Ministers, will take responsibility”. I understand that, but, having taken that responsibility, the Ministers are under more of a personal duty to come to this House and to the other place with proper budgets and proper business plans to show that there will be value for money as they go on this course. Indeed, I think we need a year’s audited statement on what has happened so far with all that money passing to a Chinese-owned business, which the state largely controls but where it does not own the assets.
It would be good as well to be updated on where the Government have got to in negotiating with the Chinese owners. I think it is tragic that we have not had a deal with the Chinese owners. Maybe it is the fault of the Chinese; I understand that there are two sides in any negotiation. However, when I looked from the outside, just using public sources, at what was on offer when the state moved in a year ago, I thought that, as a rough rule of thumb, if the state said to the Chinese owners, “We will take full responsibility for the workforce and their future payments, so we save you all the redundancy payments you would have had to make if you had carried out your closure”, the state would take on the land and buildings in the state that they were in, probably with many environmental obligations and costs of clean-up, and that would have been another relief for the Chinese authorities of the company, because otherwise they could be liable for having to clean up the site after they had closed it.
In return, the Government should have said, “You definitely keep all the debts you have incurred during your unsuccessful period of management, and the value of your share and your land and plant we would put at £1 to complete the transaction”. Some people thought I was being a bit generous there, but I think that was the shape of a deal that one might have been talking about. According to press comment, the Government have been thinking about £100 million of compensation for the liabilities that they are absorbing to also obtain the plant and the land in its current state.
We read in the press that the Chinese say that, no, they want £1 billion for this transfer of the freehold and the shares, which would seem to me to be extremely excessive in the circumstances. I would fully support the Government pushing back very hard on that and, if necessary, defending themselves in court if they cannot get a deal. But it would be in everybody’s interest if a deal could be reached. Getting to that deal would be helped if we had a published statement of the likely business plan for an enterprise now in public control and maybe soon to be in public ownership. That would also help create a mood for the negotiations with the Chinese.
I fear that that business plan, certainly for the last year and probably for the next year or so, would produce an awful lot of red ink. It would be the background to explaining to the Chinese why the idea that they might walk away with £100 million or £1 billion is for the birds. They have presided over a heavily loss-making business and they were unable to find a way to make it work, so they were thinking of incurring massive costs of closure as the alternative to carrying on with a very high rate of losses.
Like all the other speakers in this debate, I think we want a proud steel industry again in Britain, as we were used to having over many decades. I also think there is a case for keeping a virgin steel manufacturing capability, as well as a lot of electric arc recycling steel capability. That would require a study of how much longer one could carry on with these two blast furnaces, which the state will probably own quite soon, and of what would be a sort of deep or long-term maintenance schedule if it is thought that they can carry on, because these are quite ageing plants. That would perhaps be a better option than having to think about how to find an investor who wants to establish new virgin steel-making capability in our country.
What is very clear in the wider debate of the Minister and the Shadow Minister’s opening remarks is that we will not have that opportunity—through inward investment, or domestically financed investment, or City financing through private equity, or new equity issued through the AIM market, or whatever—of steel-making capability in this country as long as our energy prices are sky high.
We heard unfavourable comparisons in a previous good speech with European competitors, but, of course, they are not the main threat. Asia and America have energy prices considerably lower. In the case of the United States of America—a first-world competitor in many fields, with a much stronger economy than the European one—its electricity prices are one-quarter of the prices that industry in Britain has to pay before any subsidy.
The Government are following a bizarre policy towards energy. They put on massive carbon and emissions taxes, and all sorts of other taxes if we dare to produce any of the energy ourselves, or else we have to pay other people’s heavy oil and gas taxes as we import so much. Then they realise that this produces energy prices that mean the loss of jobs and the mass closure of industry. We have seen refineries and bits of the oil industry go, we have seen petrochemicals go, and we have seen a lot of our steel industry and a lot of our ceramics industry go.
So then they say, “Why don’t we offer a little bit back by way of subsidy to discount the very expensive energy prices we’ve got with these very high taxes imposed on the energy?” This is a very bad way of doing it: you get the worst of all possible worlds. You deter investment because the energy prices are too high. You do not give enough back in subsidy to make the businesses competitive, so they still close. You are left with a situation where you are deindustrialising, so your import bill for goods goes through the roof. Your import bill for energy also goes through the roof because of the bad mistakes made in the energy policy. That is why the UK is struggling so much.
So I plead with Ministers, for their own sakes, to do some sums: find some numbers, work out what the business case will look like, interrogate your managers, find out what you need to do to help them to sell more steel. Unless you can sell more Scunthorpe steel, there is no point pumping money in; you will not end up saving the jobs. And please tell your workforce whether you are serious about saving these jobs and really want to carry on with blast furnaces, or whether your net-zero preoccupations mean that their jobs are doomed anyway.
Clearly, issues such as parliamentary scrutiny, sunset clauses and regular reports to Parliament are important and can be discussed more thoroughly in Committee. This Bill is a signal that the Government are ready to act if it is in the public interest to do so. At present, we are not in control of our steel industry. We do not have sovereignty.
Why is the public interest not more closely defined in the Bill? I accept the explanation that we cannot forecast the circumstances. Will it be defence, national security or the construction, maintenance and operation of critical infrastructure in the United Kingdom? Which companies might be the first to impact on us? The noble Lord, Lord Bilimoria, asked this—quite understandably, given his connections with the Indian industries. Included in this must be where a steel company attempts to take a decision that might have a detrimental national implication, whatever the name of the company. I do not believe that any Minister would choose to be in this position today. There are no guarantees of success and no political kudos. It is about taking tough decisions to keep a national lifeline to try to protect our future security.
The Government recognise that blast furnace production will need to continue in the immediate future—I am sure they welcome the remarks by the previous speaker, the noble Lord, Lord Redwood, on that—and that a managed transition is vital to monitoring supply. They accept the need for public and private investment to modernise. That was repeated several times in the debate in the other place.
Opponents of the Bill have cited the cost of employees and energy. Workers in the UK earn an average of £40,000 a year and represent only 13% to 22% of total costs, depending on operating a primary basic oxygen furnace or a recycled electric arc furnace, so I argue that this is far from a labour-intensive industry. However, as has been said by previous speakers, energy costs are a different matter altogether and represent the highest in Europe.
I understand that the British industrial competitiveness scheme is being developed as part of the UK’s industrial strategy and could save a substantial amount in energy costs, but it is not due to be launched until April next year. Is there any chance that this could be brought forward? Does the Minister have any more information on the development of that policy? Germany, Spain and France have already intervened on energy costs in their steel industries. As we are now, we cannot provide long-term control or stability. We must safeguard supply chain resilience for defence, critical national infrastructure and major programmes, as stated in the impact assessment. The Government need to have the ability to respond quickly and effectively. I commend the Bill to the House.
Steel Industry (Nationalisation) Bill · Order Paper · Order Paper