Ministers ask Hunt for £300m to avert mass British Steel job losses
Ministers are urging the chancellor to provide £300m of taxpayers’ money to avert the closure of British Steel’s two blast furnaces – a move that would trigger the loss of thousands of industrial jobs in northern England.
Sky News has learnt that Grant Shapps, the business secretary, and Michael Gove, the levelling-up secretary, wrote to Jeremy Hunt this month to warn that the demise of British Steel could cost the government up to £1bn in decommissioning and other liabilities.
In their letter, a copy of which has been seen by Sky News, Mr Hunt was asked to consider the economic case for supporting both British Steel, which is owned by a Chinese conglomerate, and the wider UK steel industry.
“Every other G20 nation has maintained domestic steel production and, while we do not think that this should come at any cost, we do believe it is in HMG’s interest to offer well-designed and targeted funding which unlocks private investment, achieves a good outcome for taxpayers, and enables transformed, decarbonised and viable domestic steel production to continue in the UK in the long-term,” Mr Shapps and Mr Gove wrote.
“We do not want to become reliant on steel sources elsewhere in the same way that energy security has become self-evidently important.
“Moreover, our steel requirement will increase by 20% due to large domestic infrastructure projects already committed to in the UK.”
One industry source briefed on the discussions in Whitehall said the chancellor had instructed Treasury officials to scrutinise the request.
The letter to Mr Hunt warned that British Steel “does not have a viable business without government support”.
The British Steel plant in Scunthorpe
“Closing one blast furnace would be a stepping-stone to closure of the second blast furnace, resulting in a highly unstable business model dependent on Chinese steel imports,” Mr Shapps and Mr Gove wrote.
“The local economic impact of closing both blast furnaces is estimated to be in the region of £360m to £640m, with a further £500m to £1bn liability for HMG through compulsory liquidation, insolvency and land liabilities (though £40m could potentially be raised through asset recovery”.
“Given the magnitude of the liabilities due to fall on HMG in the event of blast furnace closure, and following the PM’s steer, we would like officials to test whether net government support in the region of £300m for British Steel could prevent closure, protect jobs and create a cleaner viable long-term future for steel production in the United Kingdom.”
The fate of British Steel, which was bought by Jingye Group out of a previous insolvency process less than three years ago, has become increasingly unclear in recent months as the current owners have indicated that they would not maintain its operations without taxpayer funding.
British Steel employs about 4,000 people, with thousands more jobs in its supply chain dependent upon the company.
According to the letter to Mr Hunt, British Steel has already informed the government that it could close one of the Scunthorpe blast furnaces as soon as next month, with the loss of 1,700 jobs.
This would be “followed by the second blast furnace closing later in 2023, creating cumulative direct job losses of around 3,000”, Mr Shapps and Mr Gove wrote.
The plea to Mr Hunt followed a round of talks between Mr Shapps and Jingye earlier in December about supporting Britain’s second-largest steel producer.
Mr Shapps’ predecessor, Jacob Rees-Mogg – who lasted just weeks as business secretary under Liz Truss – opened formal talks with Jingye in October about the provision of government funding to help British Steel decarbonise.
One of the pre-conditions set by Whitehall for the discussions was that Jingye would not cut jobs at British Steel while the discussions were ongoing, although the recent letter to Mr Hunt said that ministers “cannot guarantee the company will choose to support jobs in the short term”.
Tata Steel, which is the biggest player in the UK steel sector, has also requested financial help from the government.
Responding to an enquiry from Sky News, a government spokesman said: “The government is committed to securing a sustainable and competitive future for the UK steel sector and we are working closely with industry to achieve this.
“We recognise that businesses are feeling the impact of high global energy prices, including steel producers, which is why we announced the Energy Bill Relief Scheme to bring down costs.
“This is in addition to extensive support we have provided to the steel sector as a whole to help with energy costs, worth more than £800m since 2013.”
The request for financial support from Jingye poses a political headache for ministers, given the scale of the potential job losses which might result from a refusal to provide taxpayer aid.
An agreement to provide substantial taxpayer funding to a Chinese-owned business, however, would inevitably provoke outrage among Tory critics of Beijing.
China’s role in global steel production, after years of international trade rows about dumping, would make any subsidies even more contentious.
In May 2019, the Official Receiver was appointed to take control of the company after negotiations over an emergency £30m government loan fell apart.
British Steel had been formed in 2016 when India’s Tata Steel sold the business for £1 to Greybull Capital, an investment firm.
As part of the deal that secured ownership of British Steel for Jingye, the Chinese group said it would invest £1.2bn in modernising the business during the following decade.
Jingye’s purchase of the company, which completed in the spring of 2020, was hailed by Boris Johnson, the then prime minister, as assuring the future of steel production in Britain’s industrial heartlands.
British Steel has previously said of its negotiations with Whitehall: “We are continuing formal talks with the UK Government to help us overcome the global challenges we currently face.
“The government understands the significant impact the economic slowdown, rising inflation and exceptionally high energy and carbon prices are having on businesses like ours and we look forward to working together to build a sustainable future.”
The government has signalled that plans to bring a second runway at Gatwick into regular use will get the green light if environmental conditions are met.
Transport Secretary Heidi Alexander said she was “minded to approve” the airport’s plans but the deadline for a decision had now been pushed back until the end of October.
The main stumbling blocks facing Gatwick’s proposals are related to its provisions for noise prevention and public transport.
The Planning Inspectorate had made recommendations in those two areas after initially rejecting the scheme.
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The airport welcomed the government’s statement but did not say whether it saw a need to adjust its plans to meet the conditions.
Gatwick has until April 24 to respond to the new proposals.
The northern runway already exists at the airport parallel to the main one, but cannot be used at the same time as it is too close.
It is currently limited to being a taxiway and only used for take-offs and landings if the main one has to shut.
Gatwick wants to move it 12 metres further away to solve this problem.
The northern runway is currently only used for emergencies or where the main one is closed. Pic: PA
It says being able to run both at the same time would allow around 100,000 more flights per year and create 14,000 jobs.
Gatwick says the £2.2bn project would not need government money, would be 100% privately funded, and could be complete by the end of the decade.
The airport is already the second busiest in the UK, and the busiest single runway airport in Europe.
Campaigners argue the additional traffic would be catastrophic for the environment and the local community in particular.
Today’s update comes after the chancellor said last month the government also supported a third runway at Heathrow as part of its wider effort to bolster UK economic growth.
However, the formal planning process is still to take place.
Gatwick’s additional runway would be unlikely to open until the end of the decade, assuming any legal challenges were swiftly overcome.
A government source told Sky News: “The transport secretary has set out a path to approving the expansion of Gatwick today following the Planning Inspectorate’s recommendation to refuse the original application.
“This is an important step forward and demonstrates that this government will stop at nothing to deliver economic growth and new infrastructure as part of our Plan for Change.
“Expansion will bring huge benefits for business and represents a victory for holidaymakers. We want to deliver this opportunity in line with our legal, environmental and climate obligations.
“We look forward to Gatwick’s response as they have indicated planes could take off from a new runway before the end of this Parliament.”
Stewart Wingate, Gatwick’s chief executive, said: “We welcome today’s announcement that the Secretary of State for Transport is minded to approve our Northern Runway plans and has outlined a clear pathway to full approval later in the year.
“It is vital that any planning conditions attached to the final approval enable us to make a decision to invest £2.2bn in this project and realise the full benefits of bringing the Northern Runway into routine use.
“We will of course engage fully in the extended process for a final decision.”
He added: “We stand ready to deliver this project which will create 14,000 jobs and generate £1bn a year in economic benefits. By increasing resilience and capacity we can support the UK’s position as a leader in global connectivity and deliver substantial trade and economic growth in the South East and more broadly.
“We have also outlined to government how we plan to grow responsibly to meet increasing passenger demand, while minimising noise and environmental impacts.”
A spokesperson for campaign group Communities Against Gatwick Noise Emissions (Cagne) responded: “We welcome the extension by the secretary of state until October as she has obviously recognised the many holes in the Gatwick airport submissions during the planning hearings.
“Cagne do not believe Gatwick has been totally up front with their submissions, and the planning hearings left so many questions unanswered.”
Greenpeace UK’s policy director, Doug Parr, said of the process ahead: “By approving Gatwick’s expansion the government will hang a millstone the size of a 747 around the country’s neck.
“Such a decision would be one that smacks of desperation, completely ignoring the solid evidence that increasing air travel won’t drive economic growth. The only thing it’s set to boost is air pollution, noise, and climate emissions.”
Nvidia has signalled no drop in demand for its flagship chips among big artificial intelligence (AI) spenders despite the low-cost challenge posed by Chinese rival DeepSeek.
The leading AI chipmaker said it expected Blackwell sales to continue to grow after its latest earnings beat market expectations.
Nvidia forecast revenue of around $43bn (£34bn) for its first quarter after achieving a figure of $39.3bn (£31bn) over its last three months – up 12% from the previous quarter and 78% from one year ago.
Just a month ago, its shares took a hammering when it emerged DeepSeek‘s primary chatbot, which uses lower-cost chips, had become the most popular free application on Apple’s App Store across the US.
Nvidia’s shares lost almost $600bn in market value in a day.
It also prompted investors to question whether the AI-led stock market rally of recent years was overblown.
There was anxiety ahead of Nvidia’s earnings report though shares only fell fractionally in after-hours dealing.
Market analysts suggested demand from Microsoft, Amazon and other heavyweight tech companies racing to build
AI infrastructure remained robust, given Nvidia’s revenue guidance even though the bulk of it is accounted for through data centres.
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Nvidia founder Jensen Huang said Nvidia has ramped up the massive-scale production of Blackwell and achieved “billions of dollars in sales in its first quarter”.
“Demand for Blackwell is amazing as reasoning AI adds another scaling law – increasing compute for training makes models smarter and increasing compute for long thinking makes the answer smarter.
“AI is advancing at light speed as agentic AI and physical AI set the stage for the next wave of AI to revolutionise the largest industries,” he said.
Derren Nathan, head of equity research at Hargreaves Lansdown, said of the report: “The longer-term investment case for the driver of the AI train is looking difficult to pick holes in, with Meta’s $200bn just one of the latest mega investments in data centres to be unveiled recently.
“By virtue of scale, growth may be slowing a little but upgrades to analysts full-year numbers can be expected off the back of today’s results. At a around 30x forward earnings, the valuation still doesn’t look overcooked.”
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