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UK ministers ordered British Steel to give them 24-hour access to the country’s last blast furnace facility when they seized control of it, a sign of the high concern that its Chinese owner Jingye would break a requirement to keep the site operational.
The government in April passed emergency legislation to take control of British Steel and the two blast furnaces at its flagship Scunthorpe site after Jingye said it intended to shut the plant because it was losing £700,000 a day.
On April 12, when the law came into force, the Department for Business and Trade told Jingye it feared that British Steel or its directors might “fail to comply” with the requirement to keep the site operational, according to documents obtained by the Financial Times under transparency laws.
As a result, the department ordered Jingye to give business secretary Jonathan Reynolds and any of his staff access at “any time of day or night” to carry out inspections of the Lincolnshire site, the documents show.
The written directions also instructed British Steel’s owner to contact a departmental official by 6pm every day with “a comprehensive description of the current operational state of each blast furnace”.
The demands point to the level of concern in government that Jingye would contravene the emergency legislation, leaving 2,700 jobs at risk and Britain as the only G7 member unable to make steel from scratch.
The business department said it had “acted quickly and decisively to ensure the continued operations of the blast furnaces” and was “working closely with Jingye and a range of third parties on options for the future”.
British Steel declined to comment. Jingye declined to comment. A person close to Jingye said it was “surprised” by the inference that it “represented a threat to the continued operation of the blast furnaces once the legislation came into effect”.
The Chinese group took “the necessary steps to support the government in securing supplies” to ensure continued operation of the blast furnaces, and had told management to comply with instructions, the person added.
Although management of the Scunthorpe plant is being overseen by ministers, Jingye still owns the site and its assets. The long-term future of the plant remains unclear, with ministers’ preferred option being to find a private buyer.
But Jingye is expected to demand compensation for any loss of ownership, which people close to the company estimate could be at least £1bn.
However, the government may seek to claw back a £17.6mn loan made through its exceptional regional growth fund three years ago, although British Steel has said it considers this unlikely.
In the directions sent to Jingye on April 12, the department told the company to keep the Scunthorpe plant working and banned it from launching insolvency proceedings.
While ministers have said they would like to find a “private sector” solution in order to avoid full nationalisation, any potential buyers of British Steel are expected to demand large state subsidies.
A global glut of steel has driven down prices and the industry has been left reeling by US President Donald Trump’s tariffs, while high energy prices in Britain make the economic case for the plant more difficult.
Since the legislation passed, the government has put more than £100mn of taxpayer money towards keeping the furnaces burning. Costs are expected to rise from July 9 if the US slaps 50 per cent tariffs on British Steel’s imports because of its Chinese ownership. British Steel exports 50,000 tonnes a year of steel to the US.
The Scunthorpe plant has had a chequered history, with several failed attempts over the past decade to turn it into a profitable business.
Jingye staved off closure and saved about 3,500 jobs in the UK by buying British Steel from the UK’s official receiver for about £50mn in March 2020.
The group pledged to invest £1.2bn to revitalise British Steel’s fortunes but wanted taxpayer support to help it move to more environmentally friendly electric arc furnaces which melt down recycled steel.
Allan Bell, the British Steel director installed as interim chief executive by ministers, has announced plans to go ahead with converting the two blast furnaces into a greener steel arc furnace in a three-year, £2bn project.
A further 180 workers would be recruited to keep the Scunthorpe plant running while its future was decided, Bell said last month.