Government Review of Steel Industry

The government is appointing bankers to conduct a review of options for Britain’s struggling steel industry, while ministers are being asked to orchestrate mergers between some of the sector’s biggest players.

Appointment of Evercore

Evercore, the independent investment bank, is expected to be appointed in the coming weeks to oversee a strategic review of the sector. If confirmed, Evercore will report its findings to the Business Secretary and UK Government Investments (UKGI), the Whitehall agency that manages taxpayers’ interests in a range of companies.

Challenges Facing the Steel Industry

The steel industry is grappling with the fallout from President Trump’s tariff war and the prospect of retaliation from the European Union. The government has significant financial exposure to all three of the country’s biggest steel producers.

Financial Support for Steel Producers

Last year, ministers agreed to give Indian company Tata Steel £500 million in grants to install an electric arc furnace at its Port Talbot steelworks in Wales. The new plant is expected to be operational in 2027, but has faced fierce opposition from unions angry that the new funds were actually being used to force thousands of layoffs at the plant.

British Steel

In April, the government attempted to take control of British Steel after Chinese owner Jingye Group threatened to close Britain’s last remaining blast furnaces at its Scunthorpe site. The move sparked a diplomatic row with Beijing, with Jingye considering various legal options to seek compensation for its shares in the company.

Cost of Taking Control

The cost of taking control of British Steel had risen to £235m, on top of a £600m bill for securing the company’s future in 2019 and 2020 as the company fell into insolvency under its previous owner. The government’s move prevented the immediate loss of more than 3,000 jobs, although doubts remain about the company’s viability as a standalone entity.

Possible Merger

Some consultants believe a merger of British Steel with other industry players, including Sheffield Forgemasters, which is also under government control, will be a necessary step to maintaining steel production capacity in the UK.

Future of the Steel Industry

The government continues to work with Jingye to find a pragmatic, realistic solution for the future of British Steel. The long-term ambition for the company will require co-investment with the private sector to enable modernization and decarbonisation, protecting taxpayers’ money and maintaining steel production in Scunthorpe.

Steel Strategy

The government sees a bright and sustainable future for steel production in the UK and will set out its long-term vision for the sector in its forthcoming steel strategy, which is likely to be released either next month or early in the new year.