Taxpayer-owned steel faces ticking clock to capture Britain's green steel boom

New research [1] from the Energy and Climate Intelligence Unit (ECIU), drawing on analysis conducted by CBI Economics, finds the UK already generates enough scrap steel to support a significant expansion of domestic steelmaking, but currently exports around 75% (8 million tonnes) of that scrap steel each year because it lacks sufficient recycling capacity.  

Much of that material is exported overseas to countries such as Türkiye, where electric arc furnaces recycle it into new steel, before some finished steel products are sold back into the UK – taking potential jobs, investment and economic activity with them.  

The steel sector is at a pivotal crossroads, especially for communities in places like Scunthorpe and across the North. Following the nationalisation of British Steel (BS) in Scunthorpe and the move towards a public acquisition of Speciality Steel UK (SSUK)’s sites in South Yorkshire and the West Midlands taxpayers have a growing stake in securing a competitive long-term future for the industry. The analysis suggests that expanding domestic electric arc furnace capacity is essential to retaining more of the value generated by British scrap, strengthening industrial resilience and reducing reliance on imported steel. 

UK steel demand is projected to grow by 54% from 9.1 million tonnes in 2025 to 14 million tonnes by 2050, driven by housebuilding, offshore wind deployment, electricity network upgrades and rising demand from automotive manufacturers seeking low-carbon steel. The next few years are a key time for growth, with steel demand from electricity infrastructure alone projected to grow by around 12% per year, on average, to 2050. 

However, without further investment, the current pipeline of steel projects is unlikely to be sufficient to meet 100% of that demand domestically. The analysis estimates that the UK would require roughly two additional Port Talbot-sized electric arc furnaces to close the gap and avoid becoming increasingly dependent on imported steel. 

The critical window for investment is now. New electric arc furnaces can be commissioned in as little as 18 months to three years, meaning investment decisions taken in 2026 and 2027 will determine whether UK producers are positioned to compete for rapidly growing demand between 2028 and 2031, with the alternative being more imported steel.  

Jess Ralston, Head of Energy at ECIU, said: "Britain has the ingredients needed for a steel revival. We have growing demand from housebuilding, offshore wind, electricity networks and the automotive sector. We generate millions of tonnes of scrap steel every year. With taxpayers now having a direct stake in major parts of the industry, there is an opportunity to build on these rescues with a long-term industrial strategy." 

"The question is whether Britain captures that opportunity at home or continues exporting raw materials and importing higher-value steel products. Every shipment of scrap that leaves Britain represents jobs, investment and industrial value that could potentially be created at home." 

The report finds that in the US, Türkiye, Spain and Mexico, electric arc furnaces accounted for 72%, 70%, 69% and 97% of crude steel production respectively in 2024. 

Ralston continued: “This is about reindustrialisation, taxpayer value and industrial sovereignty. Countries around the world are investing in modern steelmaking as they recognise its strategic importance. Communities such as Scunthorpe could become centres of domestic recycling and modern steel production. But time is running out for this town, and others." 

The report, The UK’s Scrap Gap, also finds that electric arc furnaces are significantly cheaper and faster to build than new blast furnaces [2] and are capable of producing the grades of steel increasingly required by modern manufacturing supply chains. 

The analysis identifies three long-term pressures behind the sector's decline: Chinese state-supported overcapacity, high energy costs driven largely by exposure to volatile gas prices, [3] and post-Brexit trade frictions. However, it suggests that growing demand for low-carbon steel and the UK's abundant scrap resources create a significant opportunity to rebuild domestic capability if investment decisions are taken soon.