The UK government is reportedly facing the prospect of spending billions more on British Steel as ministers move toward full nationalization of the company, according to a report by Politico citing multiple steel industry sources.
During the King’s Speech on Wednesday, May 13, King Charles stated that the UK Government will take all action necessary to safeguard the domestic production of steel. Also, as SteelOrbis reported previously, the UK government said it was preparing legislation that would enable public ownership of British Steel as part of broader efforts to secure the country’s steelmaking capacity.
The UK government has already spent approximately £419 million supporting the loss-making steelmaker since taking control of the Scunthorpe steelworks nearly a year ago.
According to a March report by the National Audit Office, total government spending on British Steel could exceed £1.5 billion by 2028 if current support levels continue.
EAF transition expected to require major investment
Industry sources indicated that the largest future cost would likely come from transforming the Scunthorpe site into an electric arc furnace (EAF)-based steelmaking operation. Several steel industry figures estimated that the transition would require at least £1 billion in additional investment.
One senior industry source described the potential nationalization as “massively costly for the UK government,” warning that the state would also assume British Steel’s liabilities, further increasing the burden on taxpayers.
Under the proposed Steel Industry (Nationalization) Bill, the government would be required to conduct an independent valuation of British Steel’s assets. This process would determine whether compensation payments to existing stakeholders would be necessary.
Decarbonization timeline remains uncertain
Industry sources stated that converting Scunthorpe to EAF production could take at least five years.
According to one source, British Steel has not yet secured a national grid connection agreement, finalized procurement contracts for an EAF, or selected a construction site for the new facilities. The same source added that the extended timeline and delayed profitability are reducing investor interest in the project.
Industry Minister Chris McDonald previously acknowledged that Scunthorpe must undergo decarbonization and stated that the government expects the transition to involve cooperation between the public and private sectors. However, no commercial buyer has yet emerged for the business.
Potential merger with Specialty Steel UK discussed
Several industry figures suggested that the government could improve the attractiveness of British Steel by combining it with Specialty Steel UK, formerly part of Liberty Steel Group. SSUK already operates electric arc furnace facilities and serves higher-value sectors including aerospace, defense, oil and gas.
According to industry sources, combining the two companies could create a stronger strategic asset, particularly given the national security importance of specialty steel production.
Industry representatives also emphasized that British Steel’s long-term competitiveness will depend heavily on broader policy developments. These include the EU’s Carbon Border Adjustment Mechanism (CBAM) and future steel import quota rules in Brussels. One industry source stated that “everything has to align policy-wise to make investment attractive.”
