The British prime minister has big decisions to make after taking control of the U.K.’s last virgin steel-producing plant.
LONDON — Keir Starmer rescued Britain’s ailing steel industry to show voters he’s serious about fixing the country’s problems. Now for the hard part.
Britain’s center-left prime minister this weekend summoned U.K. lawmakers from their Easter break to take effective state control of the country’s last virgin steel-producing plant back from its Chinese owners.
“We have stepped in to save British steelmaking,” he boldly posted on X.
It is a watershed moment for the fiscally prudent British PM, who just a few months ago was at pains to stress « businesses are best run by businesses. »
But in the wake of Donald Trump’s tariff bombshell, that tone has notably shifted. Starmer pledged earlier this month to “use industrial policy to help shelter British business from the storm. »
Saving steel is a popular move — not least with right-wing populist Nigel Farage breathing down Starmer’s neck as local elections loom next month.
More than 60 percent of Brits support the renationalization of British Steel — with just 8 percent opposing the move, according to YouGov polling conducted this week. The government has so far stopped short of full nationalization, but has made clear the option remains on the table.
Yet a short-term sugar rush of public approval could come with a serious hangover.
Ministers still have many costly and contentious decisions to make about the plant, and about the industry’s long-term future.
Something to cheer
Starmer’s steel intervention has been cheered by previously downbeat MPs buffeted by the backlash to the government’s sweeping welfare cuts, and eyeing the electoral march of Farage’s Reform UK.
Blair McDougall, a political advisor in the previous Labour government in the early 2000s, this week praised “a significant moment in the fight against the inroads Reform has made with working class voters.”
“The great advantage of being in government is the ability to act in a bold way which commands attention. We can choose action where others have only words,” McDougall wrote.
The article has been approvingly shared in instant messaging groups of Labour MPs since the weekend.
Bill Esterson, chair of parliament’s energy committee, who was a shadow business minister in opposition, described the steel intervention as “action that demonstrates that the government means what it says.”
One person who speaks regularly to No. 10 strategists, granted anonymity to speak frankly, put it more bluntly: “There is just a general ‘fuck you’ mood among working-class people, and the ‘fuck you’ is voting for Reform.”
The same person said focusing on homegrown heavy industry really will help Labour fight Farage, but argued it is “not a political decision” in itself — rather “a reaction to the geopolitical realities” of a looming global trade war.
The direction Britain’s industrial policy should now take has been a live discussion at the highest levels of the Labour Party.
Chancellor Rachel Reeves faced “pushback from some of the Blairites” who wanted a more global outlook and smoother relations with China when she unveiled a platform of “Securonomics” to boost U.K. supply chains in 2023, the figure quoted above said. Reeves was later accused of abandoning Securonomics herself by seeking investment from China.
Supporting homegrown industry now appears firmly back on the agenda. “[No. 10 chief of staff Morgan] McSweeney will get this but there will be tension around this and other people will have to be dragged to the new reality,” the same figure said.
This live discussion was evident Tuesday when the government softened its line against Chinese involvement in British steel production — less than 72 hours after announcing China would be banned from the sector.
Rubber hits the road
Passing a headline-grabbing law to seize control of British Steel is, however, likely to be the easy bit for ministers, who now face big and expensive decisions about the industry’s wider future.
Cameron Brown, a former business and Treasury adviser in the last Conservative government, warned ministers had “bought time, not a solution.”
“The real test comes when serious investment decisions have to be made. Sooner or later, someone will need to put a price tag on this — and it’s still unclear where that money is coming from,” he warned.
“The Treasury has always been wary of subsidizing domestic industry where products are readily available on global markets — but steel isn’t operating as a free market, » he said. “It’s distorted by subsidies, state-backed investment, and outright dumping. If the U.K. wants to retain sovereign capability in steel, it needs to be honest about the level of support that will require.”
George Dibb, associate director for economic policy at the Centre for Economic Justice, part of the progressive IPPR think tank, agrees.
“There really are very few ways that you’re going to have steel continuing to succeed in the U.K. without state intervention,” he said. But Dibb also cautioned against seeing this support as a “cost” rather than an “investment and a down payment” on continued access to the products needed to boost infrastructure, housing and industry.
The government earmarked £2.5 billion to support the steel industry in its budget, and a government official said investment options are being worked up with the support of that cash.
Green policy
Top of the list of issues for the government to tackle is Britain’s high industrial energy costs, which have contributed to the astonishing production costs of steel in the U.K.
Reform UK and Conservative politicians skeptical of Britain’s net-zero targets have been quick to claim this has been a contributing factor in the decline of Britain’s steel industry.
Laith Whitwham, senior policy adviser at the E3G climate think tank, said instead that the lack of a coherent industrial strategy or plan for the sector had landed the U.K. in this “mess,” rather than the decarbonization drive itself.
“The U.K. steel sector and blast furnaces haven’t gotten to this point because we’re trying to cut emissions, » Whitwham said. « In fact, it’s going to be that transition to cleaner steel making that likely provides a more positive future for our industrial heartlands. »
What’s the strategy?
MPs and business are now turning their attention to Labour’s long-promised industrial strategy, which is expected in June, around the time of a tight, government-wide spending review.
In the wake of Trump’s tariff shock, officials are working to get parts of the strategy out the door sooner. No. 10 Downing Street last week announced it would relax green transition rules on vehicle manufacturers, and a second government official, granted anonymity to discuss evolving plans, said other parts of the strategy would be similarly announced before June.
Labour MP Liam Byrne, a senior lawmaker who chairs the House of Commons business select committee, said urgency over the government’s industrial strategy had been dialed up in the wake of the U.S.-triggered trade war, the escalating conflict in Ukraine, and threats from China.
“We do have to now start thinking much bigger, and we have to start doing things on warp speed,” he said. “British Steel is just a textbook example of how the relationship between the state and business has to change.”
“You can’t leave things purely to the market anymore, because the market is full of sharks, and many of those sharks are foreign nations, and when they’re investing in our country, it’s often not profit they’re seeking, it is power that they’re seeking,” he said.
What about us?
An industrial blueprint could also be helpful for ministers who are fending off inevitable demands for support from other ailing businesses.
The Scottish National Party believes an oil refinery at Grangemouth should be nationalized, while in south Wales, Labour’s political opponents are already demanding to know why parliament was not similarly recalled to save the blast furnace, and jobs, in Port Talbot.
Officials say working with India’s Tata in Port Talbot and Chinese-owned Jingye were two very different experiences.
While Tata was more transparent with government officials about its plans — even when these spelled bad news for Port Talbot — Jingye’s intentions were much harder to divine. A third official said talks with British Steel’s Chinese owner had been stuck in a “holding pattern” for months.
Business Secretary Jonathan Reynolds has been at pains to stress the Scunthorpe takeover is a special case, warning MPs it is an “exceptional and unique situation.”
But if Labour’s bold steel intervention reaps political rewards, voters and MPs could well demand more.