Chinese-owned British Steel to get £300m of taxpayers’ money

THE taxpayer is to stump up £300m to help British Steel upgrade its mill and reduce its carbon output.

A deal is close, according to Treasury sources, in an effort to modernise the Chinese-owned company’s plant at Scunthorpe, Lincs, and shore up jobs.

It had threatened to close one of its two blast furnaces and make 2,000 people redundant unless taxpayer assistance was provided.

Jingye, the Chinese company that acquired British Steel almost three years ago, has pumped in just £156m since acquiring the business in a Government-supported takeover in March 2020, The Telegraph reported in November.

The Government is keen to ensure that Jingye makes good on its plan to invest £1bn into the business over the rest of this decade and the £300m will be unlocked in instalments to ensure it continues to invest itself. The cash will be used to shift from blast furnace technology to electric arc furnaces, which will use energy from the grid and will consume less carbon as UK energy generation switches from gas to wind power.

The steel sector employs 34,500 people directly in the UK and supports a further 43,000 in supply chains. The jobs are often in areas with few other skilled careers and offer a salary averaging £37,629, 45pc higher than the UK national average.

Last week, Liberty Steel said it planned to make up to a quarter of its UK workforce redundant and halt work at two plants amid high energy costs and cheap imports. The company, part of Sanjeev Gupta’s GFG Alliance, began consultations over 440 redundancies and said it will idle its plant at West Bromwich and convert another in Newport, Wales, into a storage facility.

The Government and British Steel were approached for comment. The potential aid was first reported by Sky News.

Steelmakers in the UK are being squeezed by high energy costs compared to producers abroad, particularly those in China.

Cheap imports from China, where European producers say lax pollution regulations make the material cheaper to make, are squeezing margins on cheaper steel products such as the thick staves used to reinforce concrete in the construction industry.

But Britain is also at a disadvantage to European producers, according to UK Steel, the industry group. It estimates that German producers will pay £107 per megawatt hour of electricity in the coming financial year compared with £174 for UK steel mills.