The blast furnace closures signal the end of steel production in the UK after more than 150 years - Christopher Furlong/Getty Images
Terror laws could be used to nationalise Britain’s last steel blast furnaces after their Chinese owner threatened to shut them down.
Jonathan Reynolds, the Business Secretary, has raised the idea of using the Civil Contingencies Act as a way of rapidly nationalising British Steel, The Telegraph understands.
Introduced in 2004, the act allows ministers to invoke extraordinary powers in the event of a national emergency such as war, an attack by a foreign power or an act of terrorism.
The unprecedented move is being considered after Jingye, the Scunthorpe plant’s Chinese owner, announced plans to close both blast furnaces there after talks with the Government collapsed.
It is understood the company has suggested it could start shutting down at least one of the blast furnaces within a matter of weeks, with the second closure following as soon as June. Such a move could be irreversible once taken, unions have warned.
It would leave Britain as the only G7 nation without the ability to make new steel and trigger the loss of up to 2,700 jobs. Unions have urged Mr Reynolds to step in and nationalise the company to stop the blast furnaces from being closed.
Taking over British Steel risks exposing the Government – and by extension taxpayers – to large losses and debts.
On Saturday, newly published accounts revealed the company lost £231m before taxes in 2023.
That was down from £408m the previous year, but followed a 27pc drop in sales owing to to production outages. Production of liquid steel fell from 2m tonnes to 1.7m tonnes.
British Steel continues to be propped up financially by Jingye and has debts to related companies totalling £711m, the accounts added. The company also warned of “declining demand” in core markets such as the UK and Europe amid growing competition from cheaper imports.
Nationalisation has previously only been considered by the Government in the event that the company becomes insolvent. Jingye is not in financial distress.
However, amid cross-party warnings that losing the ability to make virgin steel poses a national security threat, Mr Reynolds is said to have discussed using the Civil Contingencies Act as a way of blocking Jingye from closing the Scunthorpe blast furnaces.
The move would effectively grant ministers the ability to write temporary laws that give them control of British Steel without needing to rush a bill through Parliament, although that would likely need to be done afterwards to make the change permanent.
However, the act has never been used before – even during the Covid pandemic – and invoking it risks spooking businesses and triggering a court battle with Jingye.
Jonathan Reynolds’ proposal to rapidly nationalise British Steel risks spooking investors - Wiktor Szymanowicz/Future Publishing via Getty Images
On Friday, Whitehall insiders refused to rule out nationalising British Steel using the act. The government previously nationalised British Steel after it collapsed in 2019.
“That will always be an option,” said one government source. They stressed that a deal with Jingye was still the preferred option, however.
The Treasury’s “special situations” team is also working closely with the Department for Business and Trade to draw up emergency plans.
Mr Reynolds is understood to have first raised the prospect of using emergency powers to regain control of British Steel in meetings last year.
The company is a major supplier to construction firms and Network Rail, which on Friday revealed it had been secretly stockpiling steel in anticipation of a crisis.
At the moment, Network Rail – which runs and maintains all rail infrastructure – sources 95pc of its steel from the Scunthorpe blast furnaces. The remainder comes from Europe.
An end to steel making in Scunthorpe risked leaving the public body with only a month’s worth of rail, leaving it unable to maintain or upgrade tracks.
But a spokesman confirmed to The Telegraph that Network Rail was now prepared for that eventuality, adding: “We now have plenty to supply all of our needs for at least the next 12 months and beyond.
“So the closure of the blast furnaces at Scunthorpe would have no impact on the railway in Britain for the foreseeable future.”
Bosses were ordered to make the contingency plans amid reports that British Steel’s Chinese parent, Jingye, was preparing to shut the company’s two blast furnaces down.
Labour ministers have been desperately trying to secure the future of steel making at the plant following the closure of Indian conglomerate Tata’s blast furnaces in Port Talbot, Wales, which also triggered the loss of more than 2,000 jobs.
Tata Steel axed 2,000 jobs at Port Talbot despite receiving £500m of taxpayers’ money - Ben Birchall/PA Wire
However, Jingye has run out of patience with the business, which is said to be losing £700,000 per day. The company had sought a £1bn support package from the Government that it had offered to match with another £1bn, with the money going towards the opening of two electric arc furnaces (EAFs).
Mr Reynolds offered the company a £500m package and demanded guarantees on jobs that Jingye was not prepared to provide.
This prompted the company to announce on Thursday that it could close both blast furnaces as soon as June without replacing them. That would leave a viable rump business capable of producing rolled steel, but only using foreign imports.
On Friday, Mr Reynolds said: “I know this will be a deeply worrying time for staff and, while this is British Steel’s decision, we will continue working tirelessly to reach an agreement with the company’s owners to secure its future and protect taxpayers’ money.
“We’ve been clear there’s a bright future for steelmaking in the UK.
“We’ve committed up to £2.5bn to rebuild the sector and will soon publish a plan for steel setting out how we can achieve a sustainable future for the workforce, industry and local communities.”
Zengwei An, chief executive of British Steel, said the closure of the blast furnaces was “extremely difficult for staff” but necessary “given the hugely challenging circumstances the business faces”. The company is consulting on redundancy plans.
