Briefing: Parliament recalled to discuss emergency legislation around British Steel

"Job losses are a grim prospect for anyone but could have been particularly devastating in communities like Scunthorpe that rely heavily on one or two industrial sites. Steel production in the UK has been declining since the 1970s, long before climate commitments, and the lingering gas crisis has forced up energy bills to a crunch point for Scunthorpe. Clearly, we cannot afford to stick with the status quo. 

“Successive Governments could have acted earlier to secure a future for the steel industry if they’d had a strategy like the EU's recent Steel Action Plan, but UK investments and policies have been piecemeal without a clear direction for decades. Lowering electricity prices, through more renewables, reducing the time gas sets the price and the Review of Electricity Market Arrangements, and boosting the British Industry Supercharger so that industrial network charges are similar to Europe's are options the Government could still leverage. 

"Any suggestions that a new coal mine in Cumbria would have helped are misleading; 85% of coal produced by the mine was to be exported [4] and there are significant doubts that the coal from the mine could be used on its own by British Steel because of the sulphur content [5]. As we build more energy infrastructure like wind turbines and the rest of the world moves to clean steel, it makes sense for us to develop our green steel industries to build the technologies in Britain and ensure that jobs in places like Scunthorpe have a long term future.

Background briefing

Key points:

• Suggestions that high industrial electricity prices are the consequence of the UK government’s net zero policies are misleading. In fact, steel producers in the UK pay less in policy costs than Germany but pay significantly more in wholesale costs.
• The principal cause of these high electricity prices are high gas prices, driven by volatility in global gas markets following the Russian invasion of Ukraine; UK Steel has said that “the main driver” of disparities in electricity prices between the UK and Europe “is now wholesale electricity costs, driven by the UK’s reliance on natural gas power generation”.
• The vast majority (85%) of the coal that would be produced from the Whitehaven coal mine in Cumbria was to be exported, and there are doubts that the coal from the mine could be used on its own by British Steel because of the sulphur content, for example the former chief executive of the Materials Processing Institute said in 2022: “British Steel have said they cannot use the coal from this mine because the sulphur levels are too high.”

 
Why has Parliament been recalled?

• On April 12th 2025, the House of Commons and House of Lords will be recalled for an extraordinarily rare Saturday sitting. This will allow MPs and Peers to vote on “legislative proposals to ensure the continued operation of British Steel blast furnaces is safeguarded.”
• This follows protracted negotiations between the government and Scunthorpe Steelworks owner, Jingye, which has claimed that the site is running losses of losses of up to £700,000 a day.
• A spokesperson from Prime Minister Sir Keir Starmer has said that the Steel Industry (Special Measures) Bill will empower the government to “direct steel companies in England”, protecting the UK’s steelmaking capacity and jobs. This is widely being interpreted as paving the way for the nationalisation of the Scunthorpe Steelworks, although this has not been explicitly confirmed by government sources.
• During negotiations with Jingye, Ministers had described nationalisation as “last resort” while also saying that all “options remained on the table”. Unions representing steelworkers, including Unite, Community, and the GMB have all supported proposals for the UK steel industry to be taken into public ownership. 

 
What challenges does the UK steel industry face today?

• The British steel industry has been in long-term decline since the 1970s, and this has been reflected both in declining output and in the fall in the number of people working in the industry. In 1971, there were approximately 323,000 steel workers in the UK. By 2014, that figure had dropped to 34,500. Similarly, the output of the UK’s basic steel and iron manufacturers fell by 72% between 1997 and 2024.
• The decline of the UK steel industry was particularly noticeable between the late-1970s and mid-1980s, as British Steel closed plants across the country - decades before efforts began to decarbonise the sector.
• This has left the UK with a much smaller steel industry than comparable economies like France, Italy and Germany. The UK steel industry is also relatively small compared to the size of our manufacturing sector.
• The shutting down of the last operational blast furnace at Port Talbot steelworks in the autumn of 2024 left the Scunthorpe Steelworks as the last producer of virgin steel in the UK. If it closes, the UK would become the only G7 economy not not capable of producing virgin steel.
• Historically, the UK steel industry has produced significantly more virgin steel than is needed to meet domestic demand. In 2023, analysts at Green Alliance found that in 2030, only around 20% of maximum domestic steel demand would need to be met with virgin iron because scrap steel can be used to produce steel for almost all uses.
• The UK also exports more scrap steel than the virgin steel we make. Finished goods are then reimported to the UK, missing a considerable opportunity to gain more value from scrap steel resources.
• More recently, the UK steel industry has been hit hard by exceptionally high electricity prices, leading to a significant fall in output. According to Make UK, in 2022 demand for British steel “fell by 15% to 8.9mt, only slightly higher than 8.6mt in 2020 during Covid, raw material costs remained at historically high levels and energy prices soared. High costs are hard to swallow and force production levels down”.
• The principal cause of these high electricity prices are high gas prices, driven by volatility in global gas markets following the Russian invasion of Ukraine; UK Steel has said that “the main driver” of disparities in electricity prices between the UK and Europe “is now wholesale electricity costs, driven by the UK’s reliance on natural gas power generation”.

 
How does the UK steel industry compare with Europe’s? 

• Suggestions that high industrial electricity prices are the consequence of the UK government’s net zero policies are misleading. In fact, steel producers in the UK pay less in policy costs than Germany - but pay significantly more in wholesale costs.
• As other countries like France and Germany have made energy intensive industries like steel exempt from up to 90% of network costs, manufacturers in the UK pay comparatively more in network costs.
• Steel producers across Europe face similar challenges to those in the UK, with RUSI stating that “many European steel producers have similarly ageing assets and face the same global market pressures, but are receiving large-scale government support to install lower-emissions plants”.
• However, many European governments - with more robust industrial strategies than the UK - have done more to protect their steel industries than the UK. For instance, the French government has introduced an industry-wide tariff, allowing steel producers to purchase electricity at a fixed-rate, providing the sector with greater security and stability.
• Consequently, producers in the UK are paying up to 50% more in electricity costs than their competitors in France and Germany, according to trade group UK steel. 

 
What have UK Governments done to help steel manufacturers?

• Responding to concerns about the impact of high energy prices on the UK steel industry, in 2024, the then Conservative government introduced a “British Industry Supercharger” to support energy intensive industries including the UK steel industry. The supercharger compensates certain energy intensive industries for policy costs - costs which are typically added to energy bills to fund environmental and social programmes such as insulating homes - as well as reducing network charges by 60%.
• The government has also recently closed the consultation on its Steel Strategy, which is intended to provide a long-term roadmap for the UK steel sector.
• It has been reported that the UK Government offered the British Steel owners, Jingye Group, £500m in March 2025 to part fund the transition from blast furnaces to electric arc furnaces. This is similar to the funding given to Tata Steel for its Port Talbot plant last year. However, it has been reported that Jingye Group wanted a greater degree of Government funding of £1bn.
• Before Parliament was recalled, it was reported that the Government bought some coking coal for the plant in Scunthorpe so that it could keep operating.
• In 2024, the Government banned the licensing of new coal mines in the UK, meaning that a proposed mine in Cumbria, which was subject to legal challenges, will not go ahead. The vast majority (85%) of the coal that would be produced from the Whitehaven coal mine in Cumbria was to be exported, and there are doubts that the coal from the mine could be used on its own by British Steel because of the sulphur content, for example the former chief executive of the Materials Processing Institute said in 2022: “British Steel have said they cannot use the coal from this mine because the sulphur levels are too high.”

 
How can the UK steel industry decarbonise?

• In 2022, the UK steel industry was responsible for around 3% of total UK emissions and 15% of industrial emissions. Globally, steel is thought to be responsible for around 10% emissions.
• Demand for steel produced using less carbon-intensive processes is anticipated to grow, as growing numbers of companies focus on emissions in their supply chains. The government’s commitment to introducing a carbon border adjustment mechanism in 2027 should also help to foster a green steel industry in the UK, insulating it from more polluting imports.
• Electric Arc Furnaces (EAFs) will be central to the decarbonisation of the UK steel industry. EAFs cannot currently produce virgin steel, but as mentioned above, this is only forecast to constitute 20% of UK demand by 2030. EAFs recycle scrap steel. They can therefore help to address the UK’s current problem of exportsing 8 million tonnes of scrap steel before reimporting final products.
• In 2016, work began on the HYBRIT pilot in Sweden. This produces steel using hydrogen instead of iron ore.
• The UK has not yet invested in large scale trials of hydrogen steelmaking.