The UK government is planning to nationalise Speciality Steel UK, a South Yorkshire steelmaker that supplies the aerospace, defence and energy sectors, in a move expected to cost around £350 million.
The firm was once part of Sanjeev Gupta's metals empire, which collapsed. Speciality Steel UK is regarded as vital to Britain's industrial supply chains, but it has failed to find a private sector buyer and its production has come to a standstill despite the company already operating a 'green' blast furnace.
The state-backed National Wealth Fund has committed £2.5 billion to steel-making in Britain. Taxpayer money has been flowing out of Speciality Steel at a rate of £3.5 million a month since August last year, according to the Daily Mail's Alex Brummer, who questioned whether the spending represented value for money.
Several potential buyers have walked away from the company, with Norwegian start-up Blastr the latest to abandon a possible deal.
Business Secretary Jonathan Reynolds said bringing the company under the government's wing would keep options open while Prime Minister Andy Burnham's party engages with workers, industry and investors to determine the future of the company's sites.
Wider pressures on UK steel
Speciality Steel's troubles come against a backdrop of wider strain on Britain's steel industry. Steel-making at Port Talbot in Wales has come to a halt, and British Steel's plant at Scunthorpe has already fallen into public hands.
Global market conditions have added to the pressure. China has flooded international markets with cheap steel, while US President Donald Trump has erected tariff barriers to protect America's domestic steel industry. Carbon taxes have added further costs for UK producers.
Roots of the crisis
The decline in British steel-making is often traced back to 2007, when the listed Anglo-Dutch steelmaker Corus was sold to Tata Steel for £6.2 billion. Tata went on to become a major investor in the UK, but it later fell out of love with steel-making and its role running the domestic industry.
Hopes pinned on infrastructure demand
There had been hopes that major UK infrastructure schemes, including the HS2 rail line and new nuclear power stations at Hinkley Point in Somerset and Sizewell C in Suffolk, would create strong domestic demand for specialist steels.
Brummer questioned whether closing traditional coking steel plants, which produce virgin steel, in favour of greener electric arc furnaces was the right approach, and suggested that without entrepreneurial leadership the future of production at Speciality Steel looked doomed. He argued the National Wealth Fund might be better placed focusing its money on sectors such as technology, pharmaceuticals and the creative industries, where he said Britain holds a stronger competitive advantage.
Reynolds said the government's engagement with workers, industry and investors would help determine what comes next for the company's sites.
