Amid political upheaval, prime minister Keir Starmer announced in a speech yesterday that the troubled British Steel will be brought back into public ownership
If accepted by a public interest test, the nationalisation of British Steel will take place later this week.
After seizing control from owner Jingye last year, it has been determined that a commercial sale is not currently possible. The company has been in an expensive state of uncertainty since.
“Public ownership is in the public interest,” says PM
If the legislation passes as expected after the King’s Speech tomorrow (Wednesday, 13 May), it will be the first time that the company has been in the public’s hands since 1988, a move intended to stabilise the company and its workers while also securing a vital British industrial asset.
As the country works on several major projects, such as Sizewell C, and the construction industry continues to reel amid global conflict and sky-high inflation, this is a small blessing.
Gareth Stace, director-general of UK Steel, said: “We strongly welcome the prime minister’s announcement to legislate for the nationalisation of British Steel.
“This provides vital certainty for the workforce, the company’s customers and the wider supply chain at a critical moment. Steel is a foundation industry and a recognised strategic national asset. Maintaining domestic production capability for British Steel’s products is essential not only for economic growth but also for our national security and resilience.
“Nationalisation is not an end goal. This must now be the beginning of a clear and credible long-term plan for British Steel. We need to see a detailed investment strategy that supports a managed transition to low-carbon steelmaking, and broader action to tackle the sky-high energy prices in the UK, which are undermining the competitiveness of the steel industry.”
Questions remain
As noted by Stace, this move should not be the final word, rather the beginning of its future. However, some issues will prove to be sticky, such as compensation for British Steel’s soon-to-be former owner, Jingye.
Peter Ware, partner and head of government at UK and Ireland law firm, Browne Jacobson, said: “This is one of the most significant acts of state intervention in British industry in decades. From a legal perspective, it raises substantial questions that will need careful navigation.
“Full nationalisation will require primary legislation addressing compensation for the former owner, governance structures and the transfer of employees, including TUPE-equivalent protections and pension obligations.
“The compensation question is particularly complex. With the government having already committed over £400m in working capital, Jingye’s scope to claim substantial compensation may be limited, but legal challenges under bilateral investment treaties or domestic property rights principles cannot be ruled out.
“Given there will be some financial exposure for the taxpayer, the governance model chosen will be critical to the venture’s long-term success – whether that is a public corporation, arm’s-length company or a vehicle designed to attract private co-investment.
“This is also a moment with wider implications. Businesses, investors and public sector bodies operating in strategically sensitive sectors should take note – state intervention of this kind is very much back on the table.”
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