UK took control of British Steel before assessing costs to taxpayers, letters show

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The UK government decided to seize control of British Steel before it had assessed the costs to taxpayers, raising questions over the ultimate price of saving the country’s last two blast furnaces.

Jonathan Reynolds, business secretary, issued a “ministerial direction” to override concerns from his own civil servants in order to maintain the struggling steelmaker’s operations at its main site in Scunthorpe, Lincolnshire, letters published on the government’s website show.

Ministers intervened in early April by passing emergency legislation to seize control of British Steel, which employs about 3,500 people in the UK, including 2,700 at Scunthorpe.

Reynolds responded to Gareth Davies, permanent secretary for business and trade, after the civil servant warned the minister on April 12 that he could not guarantee that spending taxpayers’ money on the steel rescue would meet his responsibilities.

Davies said the government had been required to act at such speed that it did not have time to gather the “necessary evidence” to ensure that the expenditure was in line with the government’s four tests.

Government spending tests require that the cost of the intervention is compared with alternative proposals or “doing nothing” to check that it represents “value for money”.

The tests also require that there is a sufficient legal basis for taking action and it meets high standards of public conduct as well as being feasible, so the move can be implemented “accurately, sustainably and to the intended timetable”.

Ministerial directions, which are rare in British politics, are formal instructions telling departments to go ahead with a spending proposal despite objections from a permanent secretary, the most senior civil servant in a ministry.

This is the first such direction this year, following two in 2023 and two in 2024 across the whole of Whitehall.

British Steel was the subject of a ministerial direction in 2019, when the company collapsed into insolvency and the then-business secretary Greg Clark sought to continue taxpayer spending to keep it under state control while it sought a private buyer. The company was subsequently bought by Chinese company Jingye in March 2020.

The government passed emergency legislation this month after it became clear that Jingye planned to close British Steel’s two blast furnaces. Closure would have left the UK as the only G7 nation without the ability to make steel from raw materials.

Reynolds subsequently oversaw the delivery of raw materials to British Steel’s Scunthorpe site to ensure the continued operation of the two furnaces.

The business secretary has said that nationalisation of the company remains a “likely option” although officials and other industry experts are preparing an “investment case” to attract a third-party buyer for British Steel. The hope is that another private company can be found to take on the company, though officials concede that this will only happen with some form of government support.

Talks between the government and Jingye over a taxpayer support package to help it invest in greener technology foundered earlier this month after the Chinese company rejected a £500mn offer from Reynolds.

Jingye was looking for as much as £1bn in support towards the £2bn project to close the two blast furnaces and build two electric arc furnaces instead.