Government spends £377m to keep British Steel running

The UK Government has poured a staggering £377 million into keeping British Steel’s Scunthorpe site running over the past nine months. This emergency intervention was crucial in preventing the closure of the last two blast furnaces in the country.

A recent report from the National Audit Office (NAO) reveals that this intervention, spearheaded by the Department for Business and Trade (DBT), has helped avert significant job losses and avoided major disruptions to essential industrial supply chains and key infrastructure projects.

This funding, which spans from April 12, 2025, to January 31, 2026, is categorized as a loan. However, there’s currently no repayment plan, no set budget, and no confirmed timeline for when this intervention will come to an end.

The urgency for action arose when there was a real risk of the furnaces shutting down. The NAO report highlights that Jingye, the owner of British Steel, had been in talks with DBT from 2022 to 2025 about shifting steel production at Scunthorpe from traditional blast furnaces to electric arc furnaces, but no deal was ever finalized.

In March 2025, Jingye revealed it was losing £700,000 daily due to tough market conditions, tariffs, and high environmental costs, and was contemplating shutting down the blast furnaces. If that had happened, it would have resulted in significant job losses at the Scunthorpe site and would have had serious repercussions for customers throughout the supply chain, including Network Rail.

In response to this looming crisis, the DBT stepped in during April 2025, recognizing that immediate action was necessary as raw material stocks were dwindling and there was a real threat of the furnaces being turned off.

Special legislation paved the way for quick action

Emergency legislation — the Steel Industry (Special Measures) Act 2025 — was enacted to empower the Department for Business and Trade (DBT) to give formal orders to British Steel, allowing them to keep their blast furnaces running.

The department wasted no time in sending a team to the site, securing vital raw materials, and setting up the necessary governance to ensure operations could continue smoothly.

According to the report, DBT believes this intervention has brought several immediate advantages, such as guaranteeing the safe operation of the Scunthorpe blast furnaces, safeguarding the UK’s primary steelmaking capabilities, and giving the Government some breathing room to conduct a broader economic and national security review of the steel industry.

£377 million spent so far, with costs still climbing

Out of the £377 million spent to date, about £359 million has been allocated directly to British Steel to help with everyday operations, including raw materials, payroll, and other ongoing expenses.

An additional £15 million was spent on consultants between April 12, 2025, and January 31, 2026.

The National Audit Office (NAO) estimates that total expenditures could hit £615 million by June 2026. If spending continues at this rate, the overall cost might soar past £1.5 billion by 2028, depending on future policy choices.

Currently, ongoing operations are costing around £1.3 million each day.

No repayment plan and no dedicated budget

The report also points out the financial uncertainty tied to this intervention.

DBT has yet to establish a repayment plan for the loan, and it’s unclear if British Steel will be able to pay back the funds.

Moreover, DBT didn’t receive specific funding for this intervention during the 2025 Spending Review, which means the department will have to find savings from its existing 2025–26 budgets to help cover some of these costs.

The government is exploring long-term options for the Scunthorpe site.

The Department for Business and Trade (DBT) is currently looking at various possibilities for the future of the Scunthorpe facility.

They’ve been in touch with Jingye, aiming to find a solution that not only supports the government’s goal of keeping steelmaking alive in Scunthorpe but also opens the door for future investment talks.

Looking ahead, the report suggests that the site might need a transition plan to shift from traditional blast furnace steelmaking to electric arc furnace production. This would be part of a larger strategy to enhance the business's long-term sustainability.

Steel strategy set to define future path

DBT has launched a dedicated Steel Programme, which focuses on managing operations at Scunthorpe and shaping future steel policies.

The department is gearing up to release a steel strategy that will outline its long-term goals for the industry, including initiatives to address broader challenges and attract investment.

Additionally, the government has previously pledged £2.5 billion to bolster the UK steel sector.

NAO calls for lessons learned for future actions

Gareth Davies, the head of the National Audit Office, commented:

“DBT acted swiftly to prevent the closure of British Steel’s Scunthorpe furnaces, which helped avoid significant job losses and serious repercussions for major UK infrastructure and construction projects. However, this comes with the hefty price of keeping operations running, and there’s still uncertainty about how long this will last.”

He further stated:

“DBT should take this experience to heart and be better equipped for future interventions.”