Steel Industry (Nationalisation) Bill

Lord Redwood Excerpts

2nd reading
Tuesday 16th June 2026 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Leong) (Lab)]

My Lords, steel is a historic British industry at the heart of our national story. For generations, steelworkers have forged not only steel but Britain’s prosperity. From Scunthorpe to Sheffield, from Port Talbot to Teesside, steel communities have powered our industrial success, strengthened our economy and contributed immeasurably to our national life. For those communities, steel is far more than an industry; it is a source of pride, identity and opportunity. It is a way of life, built over generations through skill, dedication and enterprise.

However, steel is not only about our past; it is fundamental to our future. Steel underpins our infra- structure, manufacturing base, energy networks and transport system. It is essential to the homes, railways and power stations that we build and the defence capabilities on which our national security depends. Steel is therefore not merely another sector of the economy; it is a strategic national asset. Its future is central to our economic resilience, our industrial strength and our ability to deliver the growth and prosperity that this country needs.

The global steel industry faces profound challenges. The volatile geopolitical climate, intensifying international competition and significant global overcapacity have placed enormous pressure on steel producers worldwide. British producers face those challenges while contending with energy costs that remain higher than those of most of their many international competitors. Recent events have highlighted the fragility of global supply chains. The pandemic exposed vulnerabilities that many had assumed did not exist. Russia’s invasion of Ukraine reminded us that economic and national security are inseparable. Increasing geopolitical uncertainty has underscored the importance of maintaining domestic industrial capability.

The lesson is clear: a modern industrial nation cannot afford to lose the capability to produce the materials on which its economy and security depend. Without intervention, the United Kingdom faces the prospect of being the only G7 nation unable to produce virgin steel from raw materials within its borders. That would be more than an industrial failure; it would represent a strategic vulnerability. That is why in March the Government published The UK Steel Strategy, setting out a commitment to revitalise the steel sector, restore domestic production to sustainable levels and secure the industry’s long-term future.

The strategy recognises that the Government have a vital role to play. It means tackling the drivers of high operating costs, including reducing industrial energy costs. It means maintaining a robust trade defence regime to protect British producers from unfair competition. It means working alongside industry to secure the investment that is needed to modernise and decarbonise steel production. It means ensuring that where strategically important steel-making assets are at risk, government has the tools necessary to act decisively in the national interest.

That brings me to the Bill before the House today. This Bill establishes a framework that enables the Government, where necessary and justified by the public interest, to bring steel undertakings into public ownership. This is an enabling measure. It provides the Government with the ability to intervene where strategic domestic steel-making capability is at risk and where such intervention is necessary to safeguard the national interest. As the Prime Minister has already made clear, the Government are strongly minded to use these powers in relation to British Steel, subject, of course, to the public interest test set out in the legislation.

The circumstances surrounding British Steel and the Scunthorpe steelworks are well-known to the House. Scunthorpe is the last remaining primary steel-making capability in the United Kingdom. It directly employs approximately 2,700 highly skilled workers and supports many thousands of additional jobs throughout the wider supply chain. The Government took decisive action last year under the Steel Industry (Special Measures) Act 2025 to prevent the premature and disorderly closure of the blast furnaces at Scunthorpe. I would like to place on record my gratitude to noble Lords across the House for their constructive and responsible engagement with that legislation. I pay tribute to the parliamentary staff whose efforts enabled Parliament to respond swiftly to an urgent national challenge.

The measures enacted last year served their immediate purpose. They prevented closure and ensured continued production. However, those powers were always intended to be temporary. Although they have enabled continued operation, they do not provide the flexibility required to undertake the longer-term restructuring, investment and modernisation that the business now requires. As matters stand, the Government believe that public ownership offers the most effective way to secure the company’s future and to enable strategic decisions to be taken in the long-term interests of the business, its workforce and the nation.

However, I emphasise that any decision to nationalise remains subject to the public interest test as set out in the Bill. The Government did not reach this position lightly. We engaged constructively and extensively with Jingye to pursue a commercial solution. Our clear preference was to secure the future of steel-making through agreement rather than through intervention. However, despite extensive negotiations, it has proved impossible to reach an agreement that would represent a responsible and proportionate use of taxpayers’ money. In those circumstances, the Government concluded that legislation was necessary.

Some noble Lords may reasonably ask whether nationalisation is the right answer. The Government’s response is straightforward. Nationalisation is not an ideological aim and it is not the first option either. It is a pragmatic tool available for use when the national interest requires it. The costs of losing our steel-making capability would far outweigh the costs of preserving it. Once blast furnaces are extinguished, once supply chains disperse and once specialist skills are lost, rebuilding those capabilities becomes extraordinarily difficult and expensive. Inaction carries consequences and dependency carries risks. The loss of sovereign industrial capability carries costs that cannot be easily measured in purely financial terms. That is why Governments around the world intervene to protect strategically important industries. Britain should be no different.

We believe that British Steel can succeed. With the right leadership, investment and long-term strategy, the company can be transformed. We have already seen the success of public ownership in the case of Sheffield Forgemasters. Recently, British Steel has secured important new contracts, including supplying rail infrastructure and supporting future energy projects. These are encouraging signs of the opportunities ahead.

Turning to the detail of the Bill, I recognise that it contains significant powers and that noble Lords will wish to scrutinise them closely. That scrutiny is both expected and welcome. The Government have consistently sought to ensure that the powers contained in the Bill are proportionate, necessary and appropriately constrained.

[Lord Redwood (Con)]

On a point of information—

[Lord Fox (LD)]

We do not do points of information at Second Reading.

--- Later in debate ---

[Lord Redwood (Con)]

My Lords, I congratulate the Minister on his appointment. I am also very grateful to the Minister for his honest account of this legislation, where he made it very clear that it is very likely that the strong powers in this legislation will be used sometime soon fully to nationalise the Scunthorpe works. That, I think, makes it even more curious that the Government he represents have given us an impact assessment with no numbers in it at all, no account of what a nationalisation of the Scunthorpe works would look like, what impact it would have on the public budgets, what impact, as my noble friend Lord Hunt said, it would have on the £2.5 billion allocated for steel as a whole, and no account of how it would be a transfer of money we thought had been allocated for capital investment and modernisation in creating something new to the purpose of paying losses on a very old plant whose future is very uncertain. During this debate and over the course of this Bill, I hope we can get some numbers from the Government.

When the emergency legislation went through a year ago, I think both Houses of Parliament understood that the Government were not then in a position to produce numbers, but at that point, in those debates in both Houses, strong voices said, “There must be a business plan; there must be budgets”, and we were told at that stage that these would be forthcoming in relatively short order—but we await them. We still have a menu with no prices. We still have a lack of information about what the business plan of a nationalised Scunthorpe would look like, just as we have travelled for a year with a Scunthorpe that is run by the state and paid for by the state, but not owned by the state, making enormous losses which, according to the press, have been running at £1.3 million a day. We were offered no explanation of how long this might go on, when those green shoots the Minister reports will actually translate into real cash, how much steel this plant needs to sell and at what kind of prices before it can have a positive margin or before it can maybe halve the negative margin which it has been running at for all too long. Indeed, we were told at the point when the state took on these mighty obligations that, under the previous Chinese owners, it had been losing about £700,000 a day, so if the more recent press stories are right, the losses have clearly been considerably worse over the last year.

I understand that the Minister cannot firmly say they are definitely nationalising because they have put in this public interest test and they obviously have not yet applied the test to any project to nationalise which they are currently planning. However, reading how wide the public interest test allows the Government to be in order to satisfy themselves, I do not think it is any actual prevention of the nationalisation of Scunthorpe. I am sure they are quite clever enough to come up with a plan that is well within the details of the public interest test, widely drawn as it is in this piece of legislation, so I do not think that is a reason for not giving us proper figures.

I think it would also be good, over the course of this Bill’s debates, if we could hear a more honest statement to the workforce of Scunthorpe, because the Government say two different things. They tell the press and the rest of us—and we are very relieved to hear it—that they have saved the jobs, but then the Government still seem to be wedded to a net-zero strategy, which says that all blast furnaces of the Scunthorpe type have to close—and they are the only two left—to be replaced by electric arc furnaces. Therefore, if that is still the plan, we need to be told that honestly, and the workforce needs to be told that, because, of course, there will be a very big reduction in the numbers of people working, should they switch from blast furnaces to electric arc furnaces in the case of Scunthorpe, as the Welsh steel industry discovered when the previous Government went on that journey, carried on by this Government, to replace those blast furnaces with electric arc furnaces.

Ministers should have a personal interest in wishing to get beneath the numbers and work out how much it is going to cost, not just because of pressures on public budgets and the need to assess this against alternative ways of spending the money, but also because we read that, when the initial transfer of the liabilities and the running of the plant was made to the state, the senior civil servants apparently said to the Secretary of State and Ministers that they were not able at that point to sign off that this was value for money. They were not able to sign off that it was definitely going to be a policy that was going to work. They were not saying it definitely would not work: I think they were saying they did not have enough time and it would require a lot of very detailed work and consultation.

Ministers used their right to issue a direction to the Civil Service to say, “We think the public interest is such that this is urgent, and so we are going to ignore the absence of sign-off on value for money and on the efficacy of the policy because it is worth a shot and we, Ministers, will take responsibility”. I understand that, but, having taken that responsibility, the Ministers are under more of a personal duty to come to this House and to the other place with proper budgets and proper business plans to show that there will be value for money as they go on this course. Indeed, I think we need a year’s audited statement on what has happened so far with all that money passing to a Chinese-owned business, which the state largely controls but where it does not own the assets.

It would be good as well to be updated on where the Government have got to in negotiating with the Chinese owners. I think it is tragic that we have not had a deal with the Chinese owners. Maybe it is the fault of the Chinese; I understand that there are two sides in any negotiation. However, when I looked from the outside, just using public sources, at what was on offer when the state moved in a year ago, I thought that, as a rough rule of thumb, if the state said to the Chinese owners, “We will take full responsibility for the workforce and their future payments, so we save you all the redundancy payments you would have had to make if you had carried out your closure”, the state would take on the land and buildings in the state that they were in, probably with many environmental obligations and costs of clean-up, and that would have been another relief for the Chinese authorities of the company, because otherwise they could be liable for having to clean up the site after they had closed it.

In return, the Government should have said, “You definitely keep all the debts you have incurred during your unsuccessful period of management, and the value of your share and your land and plant we would put at £1 to complete the transaction”. Some people thought I was being a bit generous there, but I think that was the shape of a deal that one might have been talking about. According to press comment, the Government have been thinking about £100 million of compensation for the liabilities that they are absorbing to also obtain the plant and the land in its current state.

We read in the press that the Chinese say that, no, they want £1 billion for this transfer of the freehold and the shares, which would seem to me to be extremely excessive in the circumstances. I would fully support the Government pushing back very hard on that and, if necessary, defending themselves in court if they cannot get a deal. But it would be in everybody’s interest if a deal could be reached. Getting to that deal would be helped if we had a published statement of the likely business plan for an enterprise now in public control and maybe soon to be in public ownership. That would also help create a mood for the negotiations with the Chinese.

I fear that that business plan, certainly for the last year and probably for the next year or so, would produce an awful lot of red ink. It would be the background to explaining to the Chinese why the idea that they might walk away with £100 million or £1 billion is for the birds. They have presided over a heavily loss-making business and they were unable to find a way to make it work, so they were thinking of incurring massive costs of closure as the alternative to carrying on with a very high rate of losses.

Like all the other speakers in this debate, I think we want a proud steel industry again in Britain, as we were used to having over many decades. I also think there is a case for keeping a virgin steel manufacturing capability, as well as a lot of electric arc recycling steel capability. That would require a study of how much longer one could carry on with these two blast furnaces, which the state will probably own quite soon, and of what would be a sort of deep or long-term maintenance schedule if it is thought that they can carry on, because these are quite ageing plants. That would perhaps be a better option than having to think about how to find an investor who wants to establish new virgin steel-making capability in our country.

What is very clear in the wider debate of the Minister and the Shadow Minister’s opening remarks is that we will not have that opportunity—through inward investment, or domestically financed investment, or City financing through private equity, or new equity issued through the AIM market, or whatever—of steel-making capability in this country as long as our energy prices are sky high.

We heard unfavourable comparisons in a previous good speech with European competitors, but, of course, they are not the main threat. Asia and America have energy prices considerably lower. In the case of the United States of America—a first-world competitor in many fields, with a much stronger economy than the European one—its electricity prices are one-quarter of the prices that industry in Britain has to pay before any subsidy.

The Government are following a bizarre policy towards energy. They put on massive carbon and emissions taxes, and all sorts of other taxes if we dare to produce any of the energy ourselves, or else we have to pay other people’s heavy oil and gas taxes as we import so much. Then they realise that this produces energy prices that mean the loss of jobs and the mass closure of industry. We have seen refineries and bits of the oil industry go, we have seen petrochemicals go, and we have seen a lot of our steel industry and a lot of our ceramics industry go.

So then they say, “Why don’t we offer a little bit back by way of subsidy to discount the very expensive energy prices we’ve got with these very high taxes imposed on the energy?” This is a very bad way of doing it: you get the worst of all possible worlds. You deter investment because the energy prices are too high. You do not give enough back in subsidy to make the businesses competitive, so they still close. You are left with a situation where you are deindustrialising, so your import bill for goods goes through the roof. Your import bill for energy also goes through the roof because of the bad mistakes made in the energy policy. That is why the UK is struggling so much.

So I plead with Ministers, for their own sakes, to do some sums: find some numbers, work out what the business case will look like, interrogate your managers, find out what you need to do to help them to sell more steel. Unless you can sell more Scunthorpe steel, there is no point pumping money in; you will not end up saving the jobs. And please tell your workforce whether you are serious about saving these jobs and really want to carry on with blast furnaces, or whether your net-zero preoccupations mean that their jobs are doomed anyway.