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The UK government has admitted nationalising British Steel is one option open to it if its efforts to rescue the Chinese-owned company fail in the coming months.
But officials insist that taking the business into public ownership — whether as a permanent or temporary move — was ministers’ least preferred route as they try to strike a deal with owner Jingye to keep it going.
Nationalisation “is one of several options we have considered”, said one government figure. “But it is not being progressed at this stage.”
The Financial Times revealed last month that ministers were prepared to spend up to £2bn from their “green steel” war chest to try to persuade the Chinese company not to close its UK operations.
However, the company is losing an estimated £1mn a day and is also grappling with difficult decisions over whether to replace its heavily polluting historic blast furnaces with new, cleaner technology.
Five years ago British Steel fell into insolvency after its pleas for a government bailout were rejected and the official receiver was appointed to find a buyer for the group.
The then Conservative government agreed to indemnify the receiver during that period, a move that amounted to a partial nationalisation that cost taxpayers £600mn before Jingye emerged as the new owner.
British Steel operates the final two remaining blast furnaces in the UK after Tata Steel closed its remaining one, in Port Talbot in south Wales, in September.
Last year, British Steel announced plans to close the two blast furnaces in Scunthorpe in Lincolnshire while investing £1.25bn building two cleaner electric arc furnaces in Scunthorpe and on Teesside.
But by September, Jingye was preparing to abandon the electric arc furnaces and instead bring forward the closure of the blast furnaces.
That prompted urgent attempts by ministers to convince the Chinese company to keep the operations going in return for more money.
One option that has been discussed would be for the government to provide generous subsidies to British Steel to keep the blast furnaces open until the electric arc furnaces are complete.
However, officials have concede that if Jingye walks away and no private buyer comes forward, then the state could have to step in to keep it going, whether permanently or temporarily.
The Unite and GMB unions would support nationalisation.
A government official told The Guardian it was only one of several options: “We would have been negligent not to look at. But it is the least attractive option.”
The business department said: “We have no plans to nationalise British Steel.” It added: “We are working across government in partnership with trade unions and businesses to secure a green steel transition that’s right for the workforce, represents a good investment for taxpayers and safeguards the future of the steel industry in Britain.”
British Steel said it was in “ongoing discussions” with the government about its decarbonisation plans, adding that “no final decisions have been made”.
Unions are due to meet Li Huiming, chief executive of Jingye, on Friday to discuss progress on the talks.