The Chinese owner of British Steel has rejected a £500m state rescue package in a move which raises fresh doubts about thousands of steel industry jobs.

Sky News has learnt that the offer was made by Jonathan Reynolds, the business secretary, in a letter sent to Jingye Group on Monday.

The proposal – aimed at facilitating the Scunthorpe-based group’s transition to green steel production – follows years of talks aimed at salvaging the future of the UK’s second-biggest producer.

Money blog: Are you better or worse off after the spring statement?

Sarah Jones, the industry minister, told a committee of MPs on Wednesday afternoon that an offer had been made by the government earlier this week, and it had been rejected by Jingye.

“We are still in talks with them at the moment,” she told the business and trade select committee.

The minister did not disclose the size of the offer, but Whitehall sources confirmed that it was £500m – equivalent to the sum awarded to the larger Tata Steel as part of a £1.25bn package finalised last year.

Government sources said the offer had been calibrated after protracted discussions between ministers, officials and their advisers lasting many months.

However, the £500m package falls well short of the sum that Jingye has been seeking from the government during several rounds of talks since Labour won last summer’s general election.

The Chinese-owned group is thought to have requested £1bn or more from ministers – double the amount handed to Tata Steel, owner of the Port Talbot steelworks in South Wales, last autumn.

The gap between the government’s offer and Jingye’s demands means that thousands of steel jobs could yet be at risk.

British Steel, which was taken over by Jingye in 2020 after a spell in public ownership, employs about 3,500 people at its sites in Scunthorpe, Teesside and elsewhere.

It has been pushing for taxpayer funding to support a transition to green steelmaking by replacing Scunthorpe’s two blast furnaces with cleaner electric arc furnaces.

The rejection of the £500m offer leaves Scunthorpe’s future on a knife edge.

It is unclear whether the government is prepared to increase the amount of money it hands to Jingye, despite Ms Jones’s insistence that discussions are ongoing.

Asked whether British Steel’s blast furnaces would continue operating during negotiations, she said: “Our preference would be for them to keep going; until at the least they have secured the volume of steel imports to keep the mills going.

“Our preference would be that this steel is secured before they close these furnaces.”

Without the injection of funding from government that it had sought, Jingye may argue that its loss-making operations are no longer viable and opt to close the blast furnaces without the financing in place to replace their output.

Reports late last year suggested that nationalisation was an option being explored by ministers.

The government’s proposal comes at a deeply sensitive time for Britain’s steel industry, with fears of swingeing US tariffs exacerbating concerns that the sector’s viability will be put at risk.

Earlier this month, Sharon Graham, general secretary of the Unite union, called on ministers to designate steel as critical national infrastructure: “Our government must act decisively to protect the steel industry and its workers following the announcement of US tariffs.

“This is a matter of national security.

“Given the importance of steel to our economy and our everyday lives it is vital it is designated as critical national infrastructure and rules are introduced to ensure that the public sector always buys UK produced steel.”

Last month, Mr Reynolds published the government’s Plan for Steel consultation, which will include up to £2.5bn in funding for the industry, in line with a commitment in last year’s Labour election manifesto.

“The UK steel industry has a long-term future under this government,” he said.

“Britain is open for business, and this government has committed up to £2.5bn to the future of steel to protect our industrial heartlands, maintain jobs, and drive growth as part of our Plan for Change.”

During the same month, Mr Reynolds held further talks with Jingye Group’s boss, Li Huiming, in the latest chapter of a negotiation which has been dragging on for more than two years.

British Steel was bought by Jingye the year after it was placed into compulsory liquidation.

The company had been owned by private investment firm Greybull Capital.

British Steel declined to comment, while the Department for Business and Trade has been approached for comment on the details of its offer to Jingye.

Rachel Reeves has delivered her much anticipated spring statement today.

The chancellor’s statement is not a formal budget – as Labour pledged to only deliver one per year – but rather an update on the economy and any progress since her fiscal statement last October.

Ms Reeves told MPs “the world has changed” since her first budget just under five months ago, and that was to blame for the string of cuts and downgrades she outlined in the Commons.

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But critics have said today’s update is a direct consequence of her decisions since taking office in July.

Here are the key takeaways from the spring statement:

The Office for Budget Responsibility (OBR) has halved the UK growth forecast for 2025 from 2% to 1%, Ms Reeves said, adding that she was “not satisfied with these numbers”.

She explained that the government’s budget will move from a deficit of £36.1bn in 2025-26 and £13.4bn in 2026-27, to a surplus of £6bn in 2027-28, £7.1bn in 2028-29 and £9.9bn in 2029-30.

While the short-term growth forecasts appear gloomy, the chancellor said the OBR predicts the economy will be “larger” by the end of the forecast compared with the time of her first budget as a result of her decisions.

The OBR expects output to grow 1% in 2025, by 1.9% next year, 1.8% in 2027, 1.7% in 2028 and by 1.8% in 2029.

On living standards, real household disposable income per person is expected to grow by an average of around 0.5 percentage points a year from 2025-26 to 2029-30, led by stronger wage growth and inflation starting to fall later in the forecast period.

Ms Reeves said disposable income will “grow this year at almost twice the rate expected in the autumn”, adding: “Households will be on average over £500 a year better off under this government.”

The chancellor announced further welfare cuts after being told the reforms announced last week will save less than planned – £3.4bn instead of £5bn.

Among the latest changes to welfare spending, Ms Reeves said the universal credit health element would be cut by 50% and frozen for new claimants rather than rising in line with inflation.

However, the universal credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30. The changes will mean a further 150,000 people will not receive carer’s allowance or the carer element of universal credit, according to the government’s own impact assessment.

The OBR has estimated the new welfare savings package will save £4.8bn.

Cuts to welfare will mean 250,000 more people – including 50,000 children – will be pushed into poverty by 2030, the government’s assessment predicts.

Separately, 800,000 people will not receive the daily living component personal independence payment (PIP) – due to tightening eligibility rules.

The chancellor pledged to “boost Britain’s defence industry and to make the UK a defence industrial superpower”.

She confirmed the government’s pledge to spend 2.5% of GDP by 2027.

The Ministry of Defence will get an additional £2.2bn next year, the chancellor said, which will be spent on new high-tech weaponry, upgrading HM Naval Base in Portsmouth, and refurbishing military family homes, among other things.

The commitment is fully funded, with cash coming from Treasury reserves and also from the decision to slash foreign aid funding.

Ms Reeves said the statement does not contain any further tax increases, but highlighted work that needs to be done to tackle tax evasion.

She announced steps to crack down on tax evasion, saying that the government will increase the number of tax fraudsters charged each year by 20%.

She says that reducing tax evasion will raise an extra £1bn for the economy.

On departmental budgets – which dictate how much different parts of government can spend until 2030 – Ms Reeves said she aims to make the state “leaner and more agile”.

The chancellor also confirmed that a voluntary redundancy scheme is set to launch for civil servants, saying this will deliver £3.5bn in “day-to-day savings by 2029-30”.

Government spending will now grow by an average of 1.2% a year above inflation, compared with 1.3% in the autumn.

Planning reforms will see house building reach a more than 40-year high by 2030, the chancellor said.

She said the OBR has forecast that the government’s reforms to cut planning red tape will boost house building by 170,000 over the next five years, to 305,000.

This would put the government on track to add around 1.3 million to Britain’s stock of homes in the UK, a rise of 16%, by the end of Parliament.

However, it will fall short of its initial target of 1.5 million houses, the OBR warned, adding that planning reforms will only increase the overall housing stock by 0.5% by the end of 2030.

How have the markets reacted?

The reaction of financial markets to a fiscal event is important, particularly as a poorly received speech can add to government borrowing costs on the bond markets.

The good news for the chancellor here is that yields – the premium demanded by investors to hold UK government debt – dipped slightly in the wake of her remarks.

The yield for UK 30-year bonds, known as gilts, eased by almost 0.1 percentage points to 5.283%.

Similar, but smaller, declines were seen for their 10 and two year counterparts.

The only other market reaction to speak of was a dip in the value of the pound which lost three tenths of a cent against the dollar and the euro.

The rate of inflation eased back by more than expected in February, according to official figures released ahead of a predicted leap in the pace of price growth.

The Office for National Statistics (ONS) said the rolling annual rate for the consumer price index (CPI) measure of inflation stood at 2.8%, slowing from 3% the previous month.

ONS chief economist Grant Fitzner said of the shift: “Clothing prices, particularly for women’s clothing, was the biggest driver of this month’s fall.

“This was only partially offset by small increases, for example, from alcoholic drinks.”

Money latest: Why the inflation data matters to you

Economists had expected a largely flat picture for the overall pace of price growth last month, but warned it is expected to leap markedly in April when households face inflation-busting increases to many bills.

They include those for energy, unless you are on a fixed rate tariff, water, and council tax.

The figures, nevertheless, will be welcome for the chancellor ahead of a difficult spring statement to MPs in the Commons.

Higher inflation has added to government borrowing costs, reducing Rachel Reeves’ headroom to meet her spending rules.

The easing in inflation was bang in line with the expectations of the Bank of England amid intense speculation over the timing of the next interest rate cut.

Financial market investors are currently split on the prospects for a reduction at the next rate-setting meeting in May, given that the Bank is projecting CPI inflation of 3.7% by the autumn.

Two cuts are currently projected over the rest of the year, with a small majority expecting that May’s meeting will agree the first.

The Bank’s job, however, is made much more difficult by the ever shifting threats to prices posed by the Trump administration’s trade war.

While some targeted tariffs have proved to be temporary to date, being withdrawn moments after they were imposed, duties on all US steel and aluminium imports have taken effect globally.

More clarity should emerge next week when a big escalation is threatened, with a broadening of US tariffs set to encapsulate the UK’s biggest trading partner, the European Union, alongside punitive charges on other nations with the largest trading imbalances with America.

Domestically, the Bank is also watching for costs being passed on by businesses from April as employer national insurance contribution (NIC) and National Living Wage (NLW) hikes, announced in October’s budget, come in to force at the same time as the bills go up.

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David Bharier, head of research at the British Chambers of Commerce, said: “Volatility will be a key feature for the next few months.

“SMEs (small and medium-sized businesses) are battling shocks from both home and abroad in the form of domestic tax increases and a looming global tariff war.

“Many firms tell us they will have to raise prices and rethink recruitment when NICs and NLW increases kick in next month. Investment is also likely to suffer until greater certainty emerges.”