UK weighs shutting last blast furnaces as plan to merge British Steel with SSUK emerges

Officials are weighing whether to shut Britain's last two blast furnaces, a move that would leave the United Kingdom without virgin steelmaking capability, as losses at Scunthorpe jump above £1 million a day. The consideration comes only eight months after the government stepped in to save the plant from closure, a rescue followed by emergency legislation and a rare parliamentary action.

British Steel, which operates the Scunthorpe steelworks in North Lincolnshire and employs about 2,700 people, has been kept afloat with taxpayers’ money after its Chinese owner, Jingye, was days from closing the site in the spring. The government’s intervention, approved by MPs on a Saturday—the sixth time since World War II that such a session was convened for a national industrial issue—staved off an immediate shutdown. Now, ministers are examining plans to end steel production at Scunthorpe and merge British Steel with Speciality Steel UK (SSUK), which is currently in the official receiver’s hands. The proposal would see SSUK’s mothballed electric arc furnace at Rotherham, South Yorkshire, restarted to provide steel for British Steel’s contracts, including supplies to Network Rail and the construction sector.

Closure of Scunthorpe, home to the UK’s last two blast furnaces, would turn Britain into the only G7 country without a domestic source of virgin steel—the very reason the government moved to preserve the site eight months ago. Electric arc furnaces recycle existing scrap steel rather than create steel from raw ore. Even as ministers pledged support for Scunthorpe, a string of government-backed initiatives could still rely on foreign steel for major projects, including offshore wind developments and a £2.1 billion programme to build new small modular reactor nuclear plants. The Mail on Sunday reported that a separate £4 billion gas-fired power station and carbon storage project, Net Zero Teesside, may also use significant quantities of Chinese steel.

Andrew Griffith, the Conservative shadow business and trade secretary, criticized the renationalisation as lacking coherence. He said the government’s approach risks taxpayers footing the bill for potential liabilities linked to China’s ownership, calling it a botched renationalisation. Alasdair McDiarmid, assistant general secretary at the steelworkers’ union Community, described the Scunthorpe proposals as “extremely concerning and scarcely believable,” warning that losing Britain’s last major primary steelmaking facility could be a strategic setback for national security and sovereignty.

The merger with SSUK is described by Whitehall insiders as one of several options under consideration. The condition of Scunthorpe’s blast furnaces is reportedly poor, and long-term replacement would likely involve new blast furnaces or a fully refurbished electric arc furnace—a path the government has been discussing with Jingye. Industry figures remain divided on whether the Rotherham facility could produce the correct types and volumes of semi-finished steel required to satisfy British Steel’s contracts.

Jingye is believed to be seeking roughly £1 billion in compensation from the UK government in exchange for relinquishing its stake in British Steel. At the same time, UK officials are said to be offering concessions such as expediting the approval of China’s new “mega embassy” in London in return for reducing the government bill. The broader cost to taxpayers of British Steel has been put at about £274 million so far, a figure industry minister Chris McDonald disclosed earlier this month, equivalent to more than £1 million per day.

Market dynamics continue to press on domestic producers. A flood of subsidised steel from abroad, particularly China, has kept global prices under pressure, while US tariffs and the potential for European measures add further headwinds. The government has yet to announce how it will curb cheap imports, with current quotas seen by some industry insiders as inadequate. A Department for Business and Trade spokesperson said the government remains committed to “a bright and sustainable future for steelmaking and steel jobs in the UK” and that discussions with Jingye over the site’s long-term future are ongoing. British Steel declined to comment further.

The export landscape is also evolving. Brussels’ carbon border adjustment mechanism (CBAM) is due to start next year, and UK Steel says Britain’s exemption from the new tax is unlikely to be in place before Easter, which would necessitate extensive paperwork detailing the carbon emissions associated with manufacturing. Frank Aaskov, director of energy and climate change policy at UK Steel, warned the administrative burden could be a meaningful hurdle for exporters.

In policy terms, the government has signaled support for heavy industry by offering a 90% rebate on electricity network charges from April, a concession designed to ease the sector’s energy costs as it navigates global competition and environmental pressures. The debate over how to safeguard Britain’s steel industry is expected to continue as ministers weigh whether to sustain a domestic primary steelmaking capability or rely on upgraded scrap-based facilities and imports to meet strategic needs.

The future of British steel is at stake not only for workers and regional economies but also for national security and industrial sovereignty. Any decision to shutter Scunthorpe would mark a major shift in the government’s industrial policy and could redefine how the UK secures essential raw materials for critical sectors such as rail, construction, and energy infrastructure. As Whitehall debates the options—ranging from a full merger with SSUK to a phased transition toward electric arc furnaces—the timeline remains fluid, and a final plan has yet to be announced.