Business Secretary Jonathan Reynolds has said it is “likely” that British Steel will be nationalised.
However he also stressed the importance of finding a private sector partner for the business because the scale of capital required for steel transformation was “very significant, even with government support”.
Mr Reynolds, speaking to reporters in the Lincolnshire town after raw materials arrived to keep the site running, said that nationalisation was the “likely option at this stage”.
He added: “What we are now going to do, having secured both control of the site and the supply of raw materials, so the blast furnaces won’t close in a matter of days, is work on the future.
“We’ve got the ownership question, which is pressing.
“I was clear when I gave the speech in parliament – we know there is a limited lifespan of the blast furnaces, and we know that what we need for the future is a private sector partner to come in and work with us on that transformation and co-fund that transformation.”
The government passed emergency legislation on Saturday to take over British Steel’s Scunthorpe plant, the last in the UK capable of producing virgin steel, after talks with its Chinese owners, Jingye, broke down.
The company recently cancelled orders for supplies of the raw materials needed to keep the blast furnaces running, sparking a race against time to keep it operational.
While those materials have been secured, questions remain about the long-term future of British Steel and whether it will be fully nationalised or the private sector will get involved.
Reynolds rows back
Mr Reynolds earlier said he would look at Chinese firms “in a different way” following the rowbut did not rule out their involvement completely.
He previously told Sky News’ Sunday Morning With Trevor Phillips,that he would not “personally bring a Chinese company into our steel sector” again, describing steel as a “sensitive area” in the UK.
However, industry minister Sarah Jones took a different position on Tuesday morning, telling Sky News she is “not ruling out” the possibility of another Chinese partner.
She said having a pragmatic relationship with Beijing, the world’s second-biggest economy, is still important and stringent tests would apply “to a Chinese company as they would to any other company”.
Asked for clarity on his position during a visit to the port of Immingham, where materials from two ships were being unloaded and transported to the plant, Mr Reynolds said: “I think we’ve got to recognise that steel is a sensitive sector.
“A lot of the issues in the global economy with steel come from production and dumping of steel products… so I think you would look at a Chinese firm in a different way.
“But I’m really keen to stress the action we’ve taken here was to step in because it was one specific company that I thought wasn’t acting in the UK’s national interest, and we had to take the action we did.”
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9:35
China relationship ‘really important’
The materials that arrived on Tuesday, including coking coal and iron, are enough to keep the furnaces running for weeks, the Department for Business and Trade said.
They are needed because if the furnaces cool down too much, the molten iron solidifies and blocks the furnaces, making it extremely difficult and expensive to restart them.
Switching off furnaces is a costly nightmare the govt wants to avoid
There’s no switch that easily turns a blast furnace on and off.
Temperatures inside can approach 2,000C and to protect the structure the interior is lined with ceramic insulation.
But the ceramic bricks expand and contract depending on the temperature, and any change needs to be done carefully over several weeks to stop them cracking.
Molten material inside the furnace also needs to be drained by drilling a hole through the wall of the furnace.
It’s a dangerous and expensive process, normally only ever done when there’s a major planned refurbishment.
That’s why the government wants to keep the furnaces at Scunthorpe burning.
The problem is, supplies for the furnaces are running low.
They need pellets of iron ore – the main raw material for making steel.
And they also need a processed form of coal called coke – the fuel that provides both the heat and the chemical reaction to purify the iron so it’s ready to make strong steel alloy.
Without a fresh supply of both the furnaces may have to be turned off in just a fortnight. And that would be a complex, costly nightmare the government wants to avoid.
‘Chinese ownership truly dreadful’
Opposition politicians have accused China of sabotage to increase reliance on its steel products, and want the country to be prevented from future dealings not only with steel but any UK national infrastructure.
Veteran Tory MP Sir Iain Duncan Smith said the government needs to define which industries are “strategic” – and prevent China from being allowed to invest in such sectors.
Liberal Democrats foreign affairs spokesperson Calum Miller said reverting to Chinese ownership would be like finding “your house ransacked and then leaving your doors unlocked”.
Image: Raw materials for the Scunthorpe steel plant
Image: Coking coal is unloaded at Immingham Port. Pic: Reuters
Reform UK leader Nigel Farage took the same position, saying the thought the government “could even contemplate another Chinese owner of British steel is truly dreadful”, and that he would not have China “in our nuclear program, anywhere near our telecoms or anything else”.
“They are not our friends,” he added.
Number 10 said on Monday that it was not aware of any “sabotage” at the plant and there is no block on Chinese companies.
The Chinese embassy has urged the British government not to “politicise” the situation by “linking it to security issues”, saying it is “an objective fact that British steel companies have generally encountered difficulties in recent years”.
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Jingye reported losses of around £700k a day at Scunthorpe, which will now come at a cost to the taxpayer.
During Tuesday morning’s interview round, Ms Jones said the government had offered Jingye money in return for investment and “we think that there is a model there that we could replicate with another private sector company”.
But she said there “isn’t another private sector company there waiting in the wings” currently, and that it may be a “national solution” that is needed.
She said “all of the options” were expensive but that it would have cost more to the taxpayer to allow the site to shut.
A YouGov poll shows the majority of the public (61%) support the government’s decision to nationalise British Steel.
Six months ago the International Monetary Fund (IMF) warned that the world economy was heading for a serious slowdown, in the face of Donald Trump’s tariffs.
It slashed its forecasts for economic growth both in the US and predicted that global economic growth would slow to 2.8% this year.
Today the Fund has resurfaced with a markedly different message. It upgraded growth in both the US and elsewhere. Global economic growth this year will actually be 3.2%, it added. So, has the Fund conceded victory to Donald Trump? Is it no longer fretting about the economic impact of tariffs?
Either way, the World Economic Outlook (WEO), the IMF’s six-monthly analysis of economic trends, is well worth a look. This document is perhaps the ultimate synthesis of what economists are feeling about the state of the world, so there’s plenty of insights in there, both about the US, about far-reaching trends like artificial intelligence, about smaller economies like the UK and plenty else besides. Here, then, are four things you need to know from today’s WEO.
The tariff impact is much smaller than expected… so far
The key bit there is the final two words. The Fund upgraded US and global growth, saying: “The global economy has shown resilience to the trade policy shocks”, but added: “The unexpected resilience in activity and muted inflation response reflect – in addition to the fact that the tariff shock has turned out to be smaller than originally announced – a range of factors that provide temporary relief, rather than underlying strength in economic fundamentals.”
In short, the Fund still thinks those things it was worried about six months ago – higher inflation, lower trade flows and weaker income growth – will still kick in. It just now thinks it might take longer than expected.
The UK faces the highest inflation in the industrialised world
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2:15
August: Tax rises playing ’50:50′ role in rising inflation
One of the standard exercises each time one of these reports come out is for the Treasury to pick out a flattering statistic they can then go back home and talk about for the following months. This time around the thing they will most likely focus on is that Britain is forecast to have one of the strongest economic growth rates in the G7 (second only to the US) this year, and the third strongest next year.
But there are a couple of less flattering prisms through which one can look at the UK economy. First, if you look not at gross domestic product but (as you really ought to) at GDP per head (which adjusts for the growing population), in fact UK growth next year is poised to be the weakest in the G7 (at just 0.5 per cent).
Second, and perhaps more worryingly, UK inflation remains stubbornly high in comparison to most other economies, the highest in the G7 both this year and next. Why is Britain such an outlier? This is a question both Chancellor Rachel Reeves and Bank of England governor Andrew Bailey will have to explain while in Washington this week for the Fund’s annual meeting.
What happens if the Artificial Intelligence bubble bursts?
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1:51
Nvidia CEO hails UK’s place in global AI race
Few, even inside the world of AI, doubt that the extraordinary ramp up in tech share prices in recent months has some of the traits of a financial bubble. But what happens if that bubble goes pop? The Fund has the following, somewhat scary, passage:
“Excessively optimistic growth expectations about AI could be revised in light of incoming data from early adopters and could trigger a market correction. Elevated valuations in tech and AI-linked sectors have been fuelled by expectations of transformative productivity gains. If these gains fail to materialize, the resulting earnings disappointment could lead to a reassessment of the sustainability of AI-driven valuations and a drop in tech stock prices, with systemic implications.
“A potential bust of the AI boom could rival the dot-com crash of 2000 in severity, especially considering the dominance of a few tech firms in market indices and involvement of less-regulated private credit loans funding much of the industry’s expansion. Such a correction could erode household wealth and dampen consumption.”
Pay attention to what’s happening in less developed countries
For many years, one of the main focuses at each IMF meeting was about the state of finances in many of the world’s poorest nations.
Rich countries lined up in Washington with generous policies to provide donations and trim developing world debt. But since the financial crisis, rich world attention has turned inwards – for understandable reasons. One of the upshots of this is that the amount of aid going to poor countries has fallen, year by year. At the same time, the amount these countries are having to pay in their annual debt interest has been creeping up (as have global interest rates). The upshot is something rather disturbing. For the first time in a generation, poor countries’ debt interest payments are now higher than their aid receipts.
I’m not sure what this spells. But what we do know is that when poor countries in the Middle East and Sub-Saharan Africa face financial problems, they often face instability. And when they face instability, that often has knock on consequences for everyone else. All of which is to say, this is something to watch, with concern.
The IMF’s report is strictly speaking the starting gun for a week of meetings in Washington. So there’ll be more to come in the next few days, as finance ministers from around the world meet to discuss the state of the global economy.
There was mixed news elsewhere in the outlook, as the UK’s economic growth forecast, as measured by GDP, was revised up for this year but revised down for next.
Latest data showed inflation stood at 3.8% and is forecast by the Bank of England to reach 4% by the end of the year.
The IMF, however, said it expected inflation to average at 3.4% in 2025, up from its previously predicted 3.2%.
That is forecast to slow to 2.5% this year, higher than the 2.3% anticipated just three months ago.
Food and services inflation had been particularly high in recent months due to rising wage bills and poor harvests.
Economic growth will be a higher 1.3% this year, up from the 1.2% forecast in July, thanks to a strong first few months of the year.
Next year, however, GDP will be 1.4% rather than 1.3% as economies across the world feel trade pressures.
Political reaction
Chancellor Rachel Reeves said: “This is the second consecutive upgrade to this year’s growth forecast from the IMF.
“But know this is just the start. For too many people, our economy feels stuck. Working people feel it every day, experts talk about it, and I am going to deal with it.”
Shadow chancellor Sir Mel Stride said the IMF assessment made for “grim reading”.
“Since taking office, Labour have allowed the cost of living to rise, debt to balloon, and business confidence to collapse to record lows,” he said.
“Working people are feeling the impact every time they shop, fill up the car, or pay their mortgage.”
There was also a surprise increase in the unemployment rate, up to 4.8% from 4.7% a month earlier, primarily driven by younger people, as a record number of people over 65 are in work, the Office for National Statistics (ONS) said.
Economists polled by Reuters anticipated no change in the jobless rate, but instead the figure is now the highest since the three months to May 2021, when the country was in lockdown due to the COVID-19 pandemic.
The ONS, however, has advised caution when interpreting changes in the monthly unemployment rate and job vacancy numbers due to concerns over the reliability of the figures.
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The labour market has struggled in recent months as the cost of employing staff became more expensive due to higher employers’ national insurance contributions and an increased minimum wage.
Wage rises slowing
Further signs of a slowing labour market were seen in the fall of annual private sector wage growth to the lowest rate in nearly four years – 4.4%.
Public sector pay growth increased more quickly, at 6%, as some public sector pay rises were awarded earlier than they were last year.
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2:25
Inflation up: the bad and ‘good’ news
Average weekly earnings rose more than expected by economists at 5% and also more than previously thought after a revision to last month’s figures (4.8%).
Also published by the ONS was data on industrial action, which showed August had the fewest working days lost to strike action in a single month for nearly six years.
What does it mean for interest rates?
While a tough job market is difficult for people looking for work, the slowing wage rises can mean interest rates are brought down.
The rate-setters at the Bank of England had been concerned about the effect higher wages could have on inflation, which it is mandated to bring to 2% though latest figures showed it was at 3.8%.
Following today’s figures, traders expect a cut in the interest rate to 4.75% in December.
No change is anticipated at the next interest rate setter meeting in November.