British Steel: ‘UK paying the price of trying to do things on the cheap for decades’

Read time: 6 mins

In brief…

• The UK government has taken control of the Scunthorpe British Steel plant, and is working to deliver the raw materials needed to keep its furnaces online, and keep producing virgin steel for the country’s building industry.
• Critics claim China bought the plant to shut down as part of a long-term plan to make the UK more reliant on Chinese imports, but a senior official tells The News Agents the UK’s steel industry is “insignificant” compared to China’s own thriving steel businesses.
• The News Agents say the situation in Scunthorpe, and the UK’s steel manufacturing crisis more generally, is due to decades of the government trying to keep industry afloat “on the cheap”.

What’s the story?

The UK's steel industry has been thrown a life-line by the government, which has taken control of the Chinese-owned Scunthorpe British Steel plant to keep it open, despite reporting huge losses.

The News Agents visited the industrial town just days before the announcement to speak to those involved in the crisis threatening 2,700 jobs. The Scunthorpe plant is the only place in the UK to make virgin steel, which is produced from iron ore, rather than scrap metal.

Jingye, the company that currently holds ownership, claims the plant was losing £700,000 a day in remaining open.

The government has said China has behaved "irresponsibly" in its handling of the plant, while Beijing has responded warning Labour against "politicising" the situation.

A spokesperson for the Chinese embassy in London has also called on the government to act in the interests of Jingye, “in accordance with the principles of fairness, impartiality and non-discrimination”.

Jingye had previously refused a half-billion aid package from the government to keep its furnaces burning to produce steel. If the Scunthorpe plant is shut down, the UK would be the only major economy unable to produce its own steel, and would make the country reliant solely on imports.

Senior Labour officials have criticised previous governments for allowing China to take control of the UK's steel industry.

A government spokesperson has now said that the materials needed for the Scunthorpe plant to continue steel production are in the UK, and will be delivered within days. If the furnaces are shut down, it is unlikely they can be restarted.

Is China trying to ‘flood the market’ with its own steel?

Critics of China in the UK have accused the country of attempting to "undermine the industrial base of democratic countries for years", suggesting its actions in Scunthorpe are part of this political strategy.

“Members of UK group Alliance on China are saying that they think China comes into Britain, and commandeers companies we can no longer afford to run properly,” says Emily Maitlis.

“Instead of investing in them – keeping the jobs going, keeping production going – they try to mothball what is going on, because they don't want us to produce our own steel.

“They want to then flood the markets of Europe and the UK with their steel, and – with everything that's going on in the tariff war with America – this is looking like a more and more attractive strategy.”

Should the UK put more trust in China?

Victor Gao, vice president of the Center for China and globalisation in Beijing, denies claims that the situation in Scunthorpe is any part of a geopolitical scheme to undermine the UK's production industry.

"I think the allegation is purely artificial and made up out of clean air," Gao tells The News Agents.

"Why should China bother about the manufacturing capabilities in Britain, other than for trading purposes?"

He adds that the British steel industry – especially when compared to China's own – is "really very inconsequential".

"China is the major provider of iron and steel products to many countries. Britain is just one of them, and it's not a very important and large sized country," he says.

"In China, we do have an admiration for the great engineering achievements of Britain, and I think this is the basis for the strong relations between China and Britain. I will be surprised if anyone in Beijing looks at Britain purely from a geopolitical perspective."

He adds that the Scunthorpe British Steel plant being sold to Jingye in the first place highlights the long-term problems that have been facing the industry in this country for many years, and says that as a business it has the right to put its own business ahead of any sense of moral responsibility to employees and the UK.

He says Starmer's upcoming visit to Beijing will be the beginning of a "new era of relations" between the UK and China.

"Britain is faced with a huge amount of problems, and China is one of the very few countries with the availability of capital, with the commitment for helping with the manufacturing side, with the size of the market in China, to work together for miracles," Gao says.

"And I think that trust between the two nations needs to be built and renewed.

"I want to use this occasion to say China is not an enemy. You do not have real enemies among the Chinese people."

Has Trump sparked concerns about Chinese influence?

Fear-mongering about China's influence in overseas markets has been agitated in recent weeks due to Donald Trump implementing his tariffs scheme, from which he recently made Chinese phones and many technical components exempt from his import tariffs.

Gao says Trump's tariff war with China is one against "mankind as a whole" and "the totality of the world".

"China will never allow any country, including the United States, to throw the rule of free trade out of the window," he says.

And while the US relies heavily on products from China, especially in technology manufacturing, Gao says most US products have "no marketability" in China.

"It's not China losing the US market. The United States runs the risk of being completely locked out of the China market."

What’s The News Agents’ take?

No matter if China is a friend or foe of the UK and its manufacturing industry, The News Agents say there has now been a realisation that a foreign country can no longer be given the access to shut-down British economic structure “at a whim”.

“I think that is the real fundamental question that Britain has never really wanted to grapple with – whether it be over nuclear power, whether it be over telecoms infrastructure – things that America have taken a firm stance on in the past, we haven't so much,” says Jon Sopel.

During Trump's first presidency, America stepped in to prevent Chinese phone company Huawei setting up systems in the UK to run the country's 5G network. China was previously involved in the development of the Hinkley Point nuclear power plant, but has since been removed – leaving it in the hands of a French company, and is now set to be years overdue.

“We put all of our cards with China, and now we're trying to scurry around the world, trying to find some coking coal, trying to find some limestone,” says Lewis Goodall.

“This is the home of the Industrial Revolution, and the British state is doing everything it can to keep this one steel plant online.

“It is actually an indictment of long term British industrial policy and strategy going back decades.”

The UK’s Net Zero commitments have often been blamed for the failure of its steel industry, as Britain doesn't currently have the means to produce steel without heavy reliance on fossil fuels.

But Lewis says this isn’t the only reason.

“For decade after decade, Britain has tried to do power on the cheap, and has not, like the French, invested in nuclear energy, or hasn't, like the Germans, invested in energy storage,” he says.

“As a result, we invite countries like China to do it in our stead, because it keeps it off the public balance sheet.

“So to some extent, the Chinese issue is important, but it's part of a wider, longer story of Britain trying to do things on the cheap, and we all pay the price for it in the long run.”

And, like so many other issues the UK is currently facing, the shadow of Brexit continues to loom large, with Britain increasingly isolated on the global stage.

“We're pretty isolated. We're not part of the EU, and we're not part of any formal trade deal yet with America,” says Emily.

“I do think that we are starting to look like bystanders in all this.”

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