British Steel on a knife edge
David Vance SubstackRead More
British Steel has become the latest test of whether Britain is prepared to pour unlimited amounts of taxpayer money into failing industries in the name of “strategic necessity” — regardless of the long-term cost. Under Starmer, it seems that is exactly where we are going as it was one of the Bills in the King’s Speech yesterday,
As we all know, British Steel has struggled for years under the weight of soaring UK energy prices, cheap foreign imports, weak productivity and mounting environmental costs. Back in 2019 it then collapsed into insolvency, putting around 5,000 jobs at risk before being rescued by China’s Jingye Group. But that rescue never fixed the deeper problem: British steelmaking remains structurally expensive and globally uncompetitive.
UK industrial electricity prices are the highest in Europe, while Chinese producers continue flooding world markets with cheaper steel backed by enormous state support. At the same time, the forced transition to greener steel production requires £££ billions in fresh investment. It’s an omnishambles!
Supporters of nationalisation argue that steel is too strategically important to lose. Britain still relies on domestic steel for defence, infrastructure, rail and construction. and the closure of major plants would devastate entire communities and increase dependence on overseas suppliers. So it’s a fair enough consideration.
Politically, no government wants to take the blame for presiding over another industrial collapse. But I am afraid that history suggests nationalisation can rapidly become a financial black hole. That is the most likely outcome here.
The old British Steel Corporation consumed billions in state support during the 1970s before eventual privatisation. In recent years, other European governments have spent vast sums propping up loss-making industrial giants with little sign of permanent recovery.
Modern steel plants are also extraordinarily expensive to maintain. Converting blast furnaces to greener electric arc technology can cost £1 billion or more per site. And even then, profitability is not guaranteed. These are HUGE sums.
Now that the government IS nationalising British Steel, taxpayers face a lot of risks;
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hundreds of millions annually in operating losses,
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massive pension liabilities,
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future environmental clean-up costs,
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and multi-billion-pound modernisation demands.
The likely outcome here is that this nationalisation will reward failure rather than competitiveness and burden us with an industry that does not work!
