British Steel’s Chinese owner seeks multimillion-pound government rescue package

The Chinese owner of British Steel has asked the government for a rescue package running into several hundred million pounds to keep open its vast steel works in Lincolnshire, sparking renewed fears for thousands of jobs.

Jingye, which bought Britain’s second-biggest steelmaker out of insolvency in 2020, has told ministers it needs financial support to keep its operations at Scunthorpe viable, according to two sources familiar with the situation.

UK representatives of British Steel met business minister Jacob Rees-Mogg twice in the past fortnight to discuss the need for aid, which was first reported by Sky News.

British Steel employs about 4,000 people, most of them at the blast furnace works in Scunthorpe, although thousands more jobs in the supply chain are dependent on the company. Jingye, which paid about £50mn in 2020, said at the time it planned to invest £1.2bn in the steelmaker over the next decade.

The business department on Saturday declined to comment on British Steel’s request for aid but said that the government was “working at pace with the company to understand the best way forward as it seeks to secure a more sustainable future”. 

“We recognise that businesses are feeling the impact of high global energy prices, particularly steel producers,” a spokesperson added, noting that the government has provided more than £780mn of support to help the sector with electricity costs since 2013.

British Steel said the company was “investing hundreds of millions of pounds” in its long-term future but that “like most other companies we are facing a significant challenge because of the economic slowdown, surging inflation and exceptionally high energy and carbon prices”. 

Britain’s steelmakers have faced a perfect storm of soaring energy prices and rising inflation which have outweighed strong steel prices on the back of surging demand in the wake of the Covid pandemic.

Unprecedented high energy prices in particular have weighed on companies’ costs. Although the government last month said it would offer businesses six months’ worth of support equivalent to the package being offered to consumers, industry executives have privately warned that more certainty on prices will be needed next year.

An added challenge looming for British Steel and Britain’s largest steelmaker, Tata Steel UK, is decarbonisation. Both companies will need financial support to help reduce carbon emissions at their blast furnace works.

The Financial Times reported in July that Tata Steel UK’s Indian owner had told ministers it would be forced to close its operations at Port Talbot in Wales if it did not secure support from the government to help reduce carbon emissions and invest in electric arc furnaces, which are less energy intensive.

Decarbonising the UK steel industry is vital if the country is to meet its pledge to reach net zero greenhouse gas emissions by 2050. The Climate Change Committee, a government advisory body, has advised that the sector needs to be “near zero” by 2035.

Alun Davies, national officer for Community, the steelworkers’ union, called on the government to do “whatever it takes to secure the future of steelmaking at British Steel”. 

“Closing down UK steelmaking capacity and replacing it with high carbon imports from China or anywhere else would weaken our country and make a mockery of the government’s net zero commitments,” he added.

Source link

Related Articles

Back to top button