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The Treasury is close to agreeing a £300m aid package for the UK’s second-biggest steel producer in a move aimed at reducing its carbon footprint and averting the loss of thousands of industrial jobs across northern England.

Sky News has learnt that Jeremy Hunt, the chancellor, has been advised by officials to approve a request from British Steel for public money following an intervention by Grant Shapps, the business secretary, and Michael Gove, the levelling-up secretary.

Whitehall sources said the government was expected to communicate a decision to the company in the coming days, which would see around £300m handed to it in instalments during the next few years.

The funding would be “directly linked” to a project to replace British Steel’s blast furnaces at its Scunthorpe site with a greener electric arc furnace, according to one person close to the situation.

Jingye Group, British Steel’s Chinese owner, would also be obliged to invest at least £1bn in the business by 2030 and make commitments relating to job retention, the person added.

If those conditions are not met, the Treasury could still decide not to proceed with the funding.

Sky News revealed last month that Mr Shapps and Mr Gove had written to the chancellor to seek approval for the package of financial support.

A decision to grant it will not be without controversy, given British Steel’s Chinese ownership and doubts about its adherence to financial commitments made when it bought the business out of insolvency proceedings in 2020.

In their December letter to the chancellor, his cabinet colleagues warned that British Steel’s demise could cost the government up to £1bn in decommissioning and other liabilities.

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The chancellor has been advised by officials to approve a request for public money

They cautioned Mr Hunt that British Steel “does not have a viable business without government support”.

“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.

“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.”

Read more:
Shapps steps up talks with British Steel-owner as job cuts loom

British Steel’s Chinese owner seeks huge government aid package

They also argued that retaining sovereignty over steel production was critical to the UK economy.

“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.

The fate of British Steel, which was bought by Jingye out of an insolvency process just under 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.

Jobs threat

According to last month’s letter, British Steel had 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.

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.

Workers leave the steelworks plant in Scunthorpe
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The company employs about 4,000 people

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 in the past year.

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.

Subsidies contentious

An agreement to provide substantial taxpayer funding to a Chinese-owned business, however, would inevitably provoke outrage among Tory critics of Beijing.

A worker delivers steel on an articulated lorry at Tata Steel's Wednesbury site in Willenhall, Wolverhampton. PRESS ASSOCIATION Photo. Picture date: Wednesday February 15, 2017. Photo credit should read: Ben Birchallirchall
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Tata Steel, which is the biggest player in the UK steel sector, has also asked for support

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 ‘can play a significant role in the UK’s economic recovery’

Responding to an enquiry from Sky News, a British Steel spokesman said: “To support the journey to net zero, our owners, Jingye, have invested £330m in capital projects during their first 3 years of ownership and they continue to invest unprecedented sums of money in British Steel.

“Jingye are committed to our long-term future but we also require the UK government to provide the necessary support, policies and frameworks to back our drive to become a clean, green and sustainable company.

“We are continuing formal talks with the government about decarbonisation, along with 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, particularly during such a key period in our transformation.

“British Steel can play a significant role in the UK’s economic recovery and we look forward to working with the government and to making the home-made steel Britain needs for generations to come.”

The Department for Business, Energy and Industrial Strategy and the Treasury have both been contacted for comment.

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Post Office campaigner Sir Alan Bates says he is yet to receive reply to letter to PM

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Post Office campaigner Sir Alan Bates says he is yet to receive reply to letter to PM

Post Office campaigner Sir Alan Bates is yet to receive a reply from Sir Keir Starmer, despite writing to him over a month ago.

Sir Alan said he had written to the prime minister to remind him the “clock is still ticking” on a financial redress deadline for victims.

In his letter, he demanded a March 2025 deadline for compensation for sub-postmaster victims of the Horizon scandal.

Sir Alan confirmed to Sky News he was yet to hear back from the prime minister.

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“It was over a month ago,” he said.

“I sent him a reminder yesterday. I told him the clock is still ticking and it’s now five months from the March deadline, which I’m told is still achievable by other professionals.

“So let’s get on with it, that’s all we want. Get on with it.”

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Vodafone and Three merger could get green light, says UK’s competition watchdog

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Vodafone and Three merger could get green light, says UK's competition watchdog

A £15bn merger between two of the UK’s biggest mobile networks could get the green light – if they stick to their commitments to invest in the country’s infrastructure, the competition watchdog has said.

The Competition and Markets Authority (CMA) said the merger of Vodafone and Three had “the potential to be pro-competitive for the UK mobile sector”.

Announced last year, the proposed £15bn merger would bring 27 million customers together under a single provider.

The watchdog previously warned that tens of millions of mobile phone users could end up paying more if the merger went ahead.

However, the two groups recently set out plans to protect consumer pricing and boost network investment.

The CMA has now laid out a list of “remedies” required for the deal to go-ahead.

They include the networks committing to freezing certain tariffs and data plans for at least three years to protect customers from short-term price rises in the early years of the network plan.

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From September: ‘A transformation for the UK’

Stuart McIntosh, chair of the inquiry group leading the investigation, said on Tuesday: “We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed.

“Our provisional view is that binding commitments combined with short-term protections for consumers and wholesale providers would address our concerns while preserving the benefits of this merger.

“A legally binding network commitment would boost competition in the longer term and the additional measures would protect consumers and wholesale customers while the network upgrades are being rolled out.”

Today’s announcement is provisional, with a final decision due before 7 December. The inquiry group is inviting feedback on today’s announcement by 5pm on 12 November.

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The CMA also published a list of potential solutions – which it called remedies – to issues it identified with the merger.

If the networks want the merger to go ahead, the watchdog requires Vodafone and Three to:

• Deliver a joint network plan to set out network upgrades and improvements over eight years;

• Commit to keeping certain existing tariff costs and data plans for at least three years to protect customers from price hikes;

• Commit to pre-agreed prices and contract terms so Mobile Virtual Network Operators (MVNOs) – mobile providers that do not own the networks they operate on – can obtain competitive wholesale deals.

Vodafone and Three are two of the biggest mobile firms in the UK, and their networks support a number of MVNOs including Asda Mobile, Lebara, Voxi, and Smarty.

Responding to the watchdog’s announcement, a spokesperson for Vodafone on behalf of the merger said: “The merger will be a catalyst for positive change.

“It will bring significant benefits to businesses and consumers throughout the UK, and it will bring advanced 5G to every school and hospital across the country.

“The merger is also closely aligned with the government’s mission to drive growth and to encourage more private investment in the UK.”

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Earlier this year, Three’s chief executive hit out at the UK’s “abysmal” 5G speeds and availability as he urged regulators to approve the company’s merger with Vodafone.

Robert Finnegan noted his firm’s “cash flows have been negative since 2020 and our costs have almost doubled in five years, meaning investment in [the] network is unsustainable”.

“UK mobile networks rank an abysmal 22nd out of 25 in Europe on 5G speeds and availability, with the dysfunctional structure of the market denying us the ability to invest sustainably to fix this situation,” he added.

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Bosses rail at business secretary over ‘avalanche of costs’

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Bosses rail at business secretary over 'avalanche of costs'

Business leaders expressed frustration with ministers on Monday amid a growing budget backlash that bosses said would trigger an “avalanche of costs” and leave them with no choice but to slash investment and increase prices.

Sky News has learnt that bosses of large retail and hospitality companies and trade associations told Jonathan Reynolds, the business secretary, that last week’s budget risked damaging consumer confidence and exacerbating challenges facing the UK economy.

Among the dozens of companies represented on the call are said to have been Burger King UK, Fuller Smith & Turner, Greene King, Kingfisher and the supermarket chain Morrisons.

Mr Reynolds is said to have acknowledged that Rachel Reeves‘s inaugural fiscal statement had “asked a lot” of British business, with James Murray, the financial secretary to the Treasury, understood to have described it as “a once-in-a-generation budget”, according to several people briefed on the call.

Business and Trade Secretary Jonathan Reynolds arrives in Downing Street.
Pic: PA
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Jonathan Reynolds. Pic: PA

One insider said that Nick Mackenzie, the chief executive of Greene King, had highlighted that the increase in employers’ national insurance (NI) contributions would cause “a £20m shock” to the company, while Fullers is understood to have warned that it would be forced to halve annual investment from £60m to £30m as a result of increased cost pressures.

Rami Baitieh, the Morrisons chief executive, told Mr Reynolds that the budget had exacerbated “an avalanche of costs” for businesses next year, and asked what the government could do to mitigate them.

Sources added that the CBI, the employers’ group, said its impact would be “severe”, while the British Beer & Pub Association added that there was now a disincentive to invest and flagged “a tsunami” of higher costs.

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How will the budget affect businesses?

The range of comments on the call with ministers underlines the scale of discontent in the private sector about Labour’s first budget for nearly 15 years.

Only a small number of interventions during the discussion are said to have been in support of measures announced last week, with the Federation of Small Businesses understood to have praised the doubling of the employment allowance, which would see many of the smallest employers having their NI bills cut by £2,000.

The Department for Business and Trade has been contacted for comment, while none of the companies contacted by Sky News would comment.

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