British Steel

Baroness Gustafsson Excerpts

Thursday 24th April 2025 Lords Chamber

[The Minister of State, Department for Business and Trade and Treasury (Baroness Gustafsson) (Lab)]

I thank the noble Lord, Lord Fox, for his question, and for acknowledging the pace of action to which many of us in this House responded. It really was a significant event, from a number of people, and I also extend my thanks in that regard.

Steel is vital to the UK, and this Government were elected with a clear mandate to rebuild the steel industry after a decade of neglect, and to support steel-workers, their families and their communities for generations to come. We have committed £2.5 billion to doing so in addition to £500 million for Port Talbot.

Resolving the years of uncertainty surrounding the future of the Scunthorpe steelworks has been a priority since our first days in office. We have worked tirelessly with Jingye and the trade unions to find a resolution for British Steel which protects jobs and ensures ongoing steel production. This included making a generous conditional offer of financial support and offering to pay for all of the company’s raw materials—offers which Jingye, British Steel’s owners, did not accept.

On 12 April, the Government took the decision to recall Parliament so that we could take urgent action on British Steel. As noble Lords will be aware, this was the first time that this House has sat on a Saturday in over 40 years. Attendance in this place was testament to the significance of the issue at hand, which was to stop the immediate closure of the blast furnaces at Scunthorpe.

The noble Lord, Lord Hunt, asked about the specific steps that we have taken since the Steel Industry (Special Measures) Act was passed on 12 April. As noble Lords are aware, the legislation gives government the power to direct British’s Steel’s board and workforce, to ensure they get paid and to order the raw materials to keep the blast furnaces running. It also permits the Government to do these things themselves if the circumstances demand it.

We have wasted no time in enacting these powers and taking the urgent action required to keep the furnaces lit at Scunthorpe. Officials were on site to help British Steel within hours of the Steel Industry (Special Measures) Act becoming law, and we are already seeing the real-world impact of our decisive intervention. As a result, we have secured the raw materials needed to keep blast furnaces operating for the coming weeks, and we continue to work at pace to secure a steady pipeline of materials. I am delighted to say that British Steel confirmed on Tuesday that it can keep operating both of the UK’s last remaining blast furnaces, in contrast with the plans of the owners, Jingye, to shut one of them down earlier this month. These actions matter greatly for this country and are of enormous importance to thousands of steel-workers and their families. I am very pleased that British Steel also confirmed on Tuesday that it has cancelled the redundancy consultations started by Jingye.

Now that the immediate emergency at Scunthorpe has been resolved, it is right that noble Lords ask questions about what is next. Officials met with Jingye on 16 April. It was a respectful conversation, and that dialogue will continue as we find a way forward, in the national interests, that safeguards steel-making and protects jobs. However, as the Minister for Industry stated on Tuesday in the other place, British Steel has suffered years of underinvestment. To secure its long-term future, we will need a modernisation programme, ideally with a private sector partner. Furthermore, we will need to look beyond any individual company and ensure a secure and thriving future for the whole steel sector, which is why we are continuing our work to publish the steel strategy this spring.

I understand the points about the financial implications of our intervention in British Steel. In the interests of transparency, the Department for Business and Trade accounts for 2025-26 will of course reflect the financial support that the department has given to British Steel. It is also important to recognise that allowing British Steel to collapse was not a no-cost or low-cost option; it would have had far-reaching economic consequences, including the loss of thousands of jobs in an economically vulnerable area. The Government’s intervention to prolong blast furnace operations at Scunthorpe was a necessary investment in the future of our economy and national security.

While the situation at British Steel has developed rapidly, we have also been working tirelessly to address the long-term sustainability and competitiveness of our steel sector. Our robust industrial strategy will be complemented by our steel strategy, due to be published in the spring, which will address the complex issues facing the industry, many of which the noble Lord, Lord Fox, acknowledged, including ageing infrastructure, high energy costs and intense global competition.

We have assured this House that steel remains a priority under this Government. Steel is fundamental to Britain’s industrial strength, and British Steel has a central role to play. As we move forward, we will keep both Houses informed with regular written updates as policy develops and our longer-term strategy takes shape. I will speak to the Chief Whip about making a commitment that it will be debated here.

To conclude, I reiterate the words of the Minister for Industry that

“steel has a bright future under this Government”.

This week is not the end: it is not the end of the work or the negotiations and, thanks to the actions we have taken, it is also not the end of British Steel.

[Viscount Hailsham (Con)]

My Lords, given that high energy costs and the increased national insurance contributions on employers are threatening the viability of British manufacturing industries, most especially steel-making, what do the Government propose to do about these additional costs?

[Baroness Gustafsson (Lab)]

Energy costs are high in the UK—I see that and regularly hear conversations about that, not just in this sector but in many industries manufacturing across the UK. The Government are already taking particular action on the UK’s high industrial energy costs, which are the highest in Europe and four times those in the United States and which have doubled in recent years.

The British industry supercharger package will bring electricity costs down significantly once fully implemented from April 2025, ensuring that energy-intensive industries such as steel are shielded from future policy costs that would have a significant impact on their electricity costs. To be clear, things such as the net-zero transition are not causing this challenge; the challenge is securing the clean energy that we need to end our reliance on the overseas oil and gas market. Indeed, UK Steel, the trade body for the steel industry, has said that it is

“the UK’s reliance on natural gas power generation”

that leaves us with higher prices than our international allies; it is not too much clean energy but too little.

[Viscount Hailsham (Con)]

What about employers’ contributions?

[Baroness Gustafsson (Lab)]

We will write on that matter.

[The Lord Bishop of Lincoln]

My Lords, following interventions from Lincolnshire MPs in the other House when the Statement was received, the Minister spoke specifically about the possibilities of further research into the use of hydrogen in relation to blast furnaces. Can the Minister comment on that? At what scale will research be undertaken to enable that to be part of the steel strategy in terms of powering blast furnaces in particular?

[Baroness Gustafsson (Lab)]

A significant part of the ongoing steel strategy will be thinking about how the provisioning of energy will be created for the long term as a reliable and sustainable source. That will form part of the long-term steel strategy plan that will be coming out. That will include provisions about how or whether it will appropriate to use hydrogen as part of that consideration.

[Lord Bellingham (Con)]

My Lords, will the Minister find time today to look at the comments by one of the UK’s foremost energy experts, Simon French of Panmure Liberum, who recently pointed out that when the UK imports oil, gas and coking coal rather than relying on domestic sources the resulting carbon emissions are a staggering four times as high? Therefore, will she commit now to ensuring that the Government look very urgently at opening up coking mines in this country and, indeed, oil and gas fields in the North Sea?

[Baroness Gustafsson (Lab)]

There is an immediate and a long-term challenge here. The immediate-term one is working to make sure that British Steel has the raw materials that it needs to be able to keep those blast furnaces running. The UK does not have any operational coke ovens, so we are unable to change domestically mined coal into the coke that is required for blast furnaces. This means we are required to import it. There have been questions about whether we can be thinking about a Cumbria development to be able to source some of that, and it has been explored, but the current assessment is that coal from the Whitehaven mine, for example, has too high a sulphur content for British Steel’s needs.

[The Earl of Effingham (Con)]

The Minister has talked about transparency and updates, so may I please ask her—and I do not expect her to have this to hand now—for more detailed information? There are many noble Lords who would greatly appreciate seeing a very simple spreadsheet showing us the inputs and why it is apparently costing £700,000 per day to run this operation. Can she commit to providing us with the numbers so we can see where the costs are coming from, why and whether we can have a viable ongoing concern that might even break even?

[Baroness Gustafsson (Lab)]

Creating an ongoing, viable concern is absolutely the aspiration for the sector, not necessarily with regard to British Steel specifically, but the much broader sector. As I said earlier, we have the immediate-term question of how we make sure that the day-to-day operation of British Steel is ongoing and running. That second longer-term piece is how we make it a financially sustainable industry and one that is able to wash its own face economically. To that part, that is where that steel strategy is really core. With regard to the specifics of what we are spending in the here and now, that is absolutely information that will be made available within part of the department’s accounts when they are published.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the annual volume of steel scrap exported from the UK was 7.22 million tonnes in 2023, 8.24 million tonnes in 2022 and 7.4 million tonnes in 2021. That figure is not going down: it is bobbling around, which is a product of both the supply of scrap steel from within the UK and what is happening in markets to which it is being exported, particularly the Indian subcontinent. My question is about the Government’s long-term vision. That amount of steel would ensure that if we were to recycle that ourselves under the best possible environmental conditions, we would obviously be creating jobs and opportunities to secure a supply of steel for the just transition that we need. Is the Government’s long-term vision a circular economy in steel so we are not exporting scrap steel?

[Baroness Gustafsson (Lab)]

I can confirm that thinking about how we create that circular economy within the steel industry and how we think about scrap steel will absolutely be a key aspect of the steel strategy.

[Baroness Hazarika (Lab)]

My Lords, could the Minister give us any indication of how much of the steel that we hope will still be produced in Scunthorpe will be used for the defence equipment that we may have to produce in this country now because of our changing defence situation and for the house building we are planning to do?

[Baroness Gustafsson (Lab)]

With regards to the specifics of Scunthorpe, I am not yet in a position to be able to confirm how much that would be used domestically. Currently only 40% of the UK’s demand is provided domestically, so there is a significant domestic market that we could be looking to serve here.

[Baroness Neville-Rolfe (Con)]

My Lords, steel is a strategic national asset, which is, of course, why our Front Benches worked together on that long Saturday 12 April in a very enlightening debate, which was also informed by the background of US tariffs. Are the Government worried about the future of other strategic national assets, perhaps as a result of sky-high electricity price or inappropriate Chinese involvement? Cement might be one area, but I am sure the noble Baroness will be able to tell us what the Government are looking at in this area, whether there are causes of concern and how they are dealing with them.

[Baroness Gustafsson (Lab)]

The noble Baroness is right. Today’s world feels like it is changing from a Monday to a Tuesday. We must not forget that in all of this, we should have that north star—what are those assets that we have within the UK and those industries that we see encouraging all our future growth, and how can we support them? The purpose of the Government’s industrial strategy is to illuminate exactly that: how do we identify those key sectors and what are the facets that we need to intervene in to be able to support the growth? A key aspect of that is energy costs, which is why things such as the supercharger scheme is so important. They need to be targeted at those sectors that we see as really essential to the UK.

[Lord Fox (LD)]

My Lords, I ask the Minister to reaffirm that the steel strategy is not mutually exclusive of the net-zero strategy but central to it going forward. There is an unfortunate tendency to think you can have one and not the other. Can the Minister confirm that the aim is to deliver one through the other?

[Baroness Gustafsson (Lab)]

I confirm exactly that: energy is going to be such an important growth driver across all our sectors, and a key one that we are talking about today is the steel strategy. For us to grow a sustainable and powerful industry within the UK, we need a sustainable and powerful source of energy that is generated here and that we can rely on. That is why the two go hand in hand.

[Viscount Hailsham (Con)]

I press the Minister further on the impact of the increase in employers’ national insurance contributions. What is the Government’s assessment of the impact of those increases on steelmaking?

[Baroness Gustafsson (Lab)]

I would be more than happy to follow up specifically in that regard.

[Lord Bellingham (Con)]

My Lords, can I just push the Minister on the last part of my question? She answered my point about coking coal production in the UK, but not oil and gas fields in the North Sea. Is it now the Government’s intention to pursue vigorously the production in those fields in the North Sea, including Rosebank?

[Baroness Gustafsson (Lab)]

I am more than happy to follow up specifically on that matter with you separately.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the Minister spoke about seeking new private sector involvement in Scunthorpe and the steelworks. We have seen so much private sector involvement in sectors such as the water industry, with essentially the privatisation of profits and cash and the socialisation of debts and costs. Can the noble Baroness assure me that that will not happen here?

[Baroness Gustafsson (Lab)]

I think we have been clear about the best way forward: we would like this to be a commercially run business, with private investment and government acting in support. But we will do whatever it takes to give the UK the best chance to safeguard the future of steel-making. That is why we would talk about the most likely outcome, as the Secretary of State has mentioned, being that of nationalisation.

[Lord Hunt of Wirral (Con)]

If there are no further Back-Benchers, may I just ask a question of the Minister again, very briefly? We are impressed with her enthusiasm. Indeed, if I may say so, there is a spring in her step. She referred several times to the steel strategy being published in the spring. Well, I detect that summer—although we may not believe it—is just round the corner. So, when will that steel strategy be shared with this House?

[Baroness Gustafsson (Lab)]

I thank the noble Lord very much and I am proud that I have a spring in my step. I am just back from a bank holiday weekend which I spent in a garden, and indeed it felt very spring-like. But until I take those covers from my ferns, it is not yet summer.