steel furnace

British Steel job losses prompt government support for energy-intensive firms

Image credit: DT

British Steel will cut 260 jobs and close the coking ovens at its Scunthorpe plant as the government announces extra support for businesses facing high energy costs.

The Chinese-owned steelmaker said it will close the facility as part of its drive to overcome global economic challenges and build a “green and sustainable future”.

Coking ovens bake coal at high temperatures to produce coke, which is used to fuel blast furnaces for steel production. The Scunthorpe closure is likely to mean coke will be imported instead.

Energy-intensive industries in the UK have faced tough conditions over the last year due to dramatic fuel price increases in the wake of the war in Ukraine.

British Steel said its bills for energy and carbon increased by £190m last year, adding that “decisive action” was required because of the “unprecedented rise” in operating costs, surging inflation and the need to improve environmental performance.

Today, the Department for Energy Security and Net Zero announced measures to bolster the finances of 300 energy-intensive companies in sectors including steel, metals, chemicals and paper.

It said it wanted to ensure the energy costs for key UK industries are in line with other major economies around the world.

The proposed changes, which will be consulted on in the coming months, will exempt firms from certain costs arising from renewable energy obligations such as the Feed in Tariff, Contracts for Difference and the Renewables Obligation, as well as GB Capacity Market costs, whilst exploring reductions in network charges, which are the costs industrial users pay for their supply of electricity.

British Steel chief executive Xifeng Han said: “Steel is vital to modern economies, and with demand expected to grow over the coming decades, British Steel has a crucial role to play in ensuring the UK has its own supply of high-quality steel.

“To make sure we can deliver the steel Britain requires, we’re undergoing the biggest transformation in our 130-year history.

“To support the journey to net zero, our owners, Jingye, have invested £330m in capital projects during their first three years of ownership and they continue to invest unprecedented sums of money in British Steel.

“Jingye is committed to our long-term future, but decarbonisation is a major challenge for our business and, like most companies, we’re facing significant challenges because of the economic slowdown, rising inflation and exceptionally high energy prices.

“For example, last year our energy bill rose by £120m while we’ve also faced an increase of over £70m in our annual carbon costs.

“We have taken action to reduce costs within our control; however, steelmaking in the UK remains uncompetitive when compared to other international steelmakers.”

In 2019, British Steel fell into liquidation after failing to find a buyer, with the owner Greybull Capital blaming the collapse on Brexit.

In 2020 it was finally bought by the Chinese firm Jingye Group which secured around 3,200 UK jobs in the process.

Steelmakers are facing increased scrutiny over the high energy usage and carbon emissions associated with the industry. Experts have warned the sector could become a “carbon pariah” without greater investment in low-carbon technologies for steel production.

In reaction to the latest job cuts, the Unite union has raised the threat of possible industrial action.

General secretary Sharon Graham said: “British Steel workers are faced with the toxic combination of a greedy employer that is reneging on investment promises and a shambolic UK Government that has no serious plan for the industry.

“Unite’s members in British Steel are clear that they will fight this and they will have the full support of their union.”

Jonathan Reynolds, shadow business secretary, said: “Yet more worrying news for our steelworkers who desperately need a government on their side securing the bright future our steel sector could have.

“Steel is the bedrock of many communities across the UK. It is the foundation our manufacturing sector is built on, crucial to any net-zero ambition and the beating heart of our sovereign capability.

“That is why Labour will partner with industry to invest in the new technologies needed to keep well-paid steel jobs in the UK for decades to come.”

Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.

Recent articles