The British steel industry is on life support – but should the taxpayer foot the bill?

What could still be the death of the British steel industry pains me. As a child in Stocksbridge, on the edge of Sheffield, I grew up around it. My father worked for British Steel. So did my grandparents.

We could see its imprint on the town every time my brother and I were taken down the steep hill we lived at the top of to visit our grandparents: a mass of twisted metal (or so it seemed to my childish eyes) and mountains of coal.

Sheffield still has a share of the industry, but it employs only a fraction of the people that once worked there. The government is now desperately trying to save what remains a big employer in Scunthorpe.

Here’s the problem: business secretary Jonathan Reynolds has been talking about finding a “commercial partner” for the rump British Steel, with its irreplaceable blast furnace that ministers and their officials are trying to keep firing now that the Chinese owner Jingye has departed with accusations of sabotage following it out the door.

While Reynolds has admitted that nationalisation is the “most likely” outcome of the current crisis, the government doesn’t really want to be in the business of steelmaking, and it will try to find someone willing to take the thing off its hands.

But who might that be? There is no domestically based operator willing and/or able to step up because the economics are horrible. The overseas ones that have been previously tried haven’t worked out so well.

Problem one, as my colleague John Rentoul discussed at the weekend, is the way net zero was enshrined in UK law. The political class duly patted itself on the back for its virtue and then either looked away or wrung its hands as the unintended consequences bit down hard on the manufacturing sector.

Destroying a chunk of what remains of this for the purposes of hitting a self-imposed target looks increasingly bonkers. Sure, the UK would be a greener place if British Steel’s blast furnaces were to fire no more, but with the net impact being more imports from China, which is burning coal like it has gone out of fashion, the world would remain as it is.

Problem two is obviously Donald Trump’s tariffs, which, at 25 per cent on steel, will have a devastating impact on Britain’s exports to this important market. Worse still is that they will also inevitably shift the product from places like China – a country that faces even higher tariffs – over to markets where they don’t apply. The British Retail Consortium is already sounding the alarm over this because it isn’t just steel that is causing problems for domestic producers, who will find themselves undercut and gasping for financial air. There was a glut of steel on the world market before Trump even got started. Bring him into town, and what you have is a perfect storm.

True, the government can adjust its green policies to make life easier for metal bashers and makers, as it has recently been doing with, for example, the ridiculous fines levied on carmakers for failing to sell enough electric vehicles, even though they’re doing everything in their power to encourage buyers. Those fines should be scrapped, by the way.

However, there remains the problem of alleged Chinese dumping, of oversupply, and of the way that markets are apt to move against and crush the small fry, which is what British Steel now is, at times like this.

Nostalgia be damned, including my own. Hard economic facts raise an uncomfortable question that needs to be addressed: Is there any point in trying to save this thing, even if Ed Miliband’s net zero ambitions are quietly put on ice?

The government thinks so. And there is indeed a case to be made in these days of economic nationalism and unreliable allies and/or partners, not to mention the fact that British Steel provides thousands of relatively highly paid jobs in an area where they don’t grow on trees. There are also political considerations at work in a part of Britain that has become a natural hunting ground for Nigel Farage and his Reform party.

However, this means ministers are going to knuckle down and accept the risk of operating a plant in Scunthorpe that Reynolds has admitted is valued at zero, which is going to be on the taxpayer for the foreseeable future.

British Steel production has been allowed to lurch from crisis to crisis for too long. It really needs to stop. By all means, contract with a commercial partner to run the thing. The government isn’t geared up to do that. Running businesses is not where it shines. But the ownership – and the risk – will have to stay with the taxpayer, perhaps for good. Needless to say, that could prove expensive.

On the other hand, there may be rewards flowing from this arrangement down the line (quite a way down the line, but still) if Reynolds and co can construct an industrial policy worthy of the name. We’re still waiting on that, as this episode rather proves.