British Steel Faces Prolonged Turmoil Over £1 Billion Dispute With Government Leading To US Tariff Risks

British Steel, the country’s last operational blast furnace, is caught in an escalating standoff between its Chinese owners, Jingye, and the UK government. The disagreement centres on a compensation demand exceeding £1 billion by Jingye for relinquishing its ownership of the company. This lingering deadlock threatens to jeopardise the future of British Steel and its export operations globally, especially in the United States.

The dispute originated in April when the government assumed control of the Scunthorpe steelworks amidst accusations that Jingye’s operations were linked to Chinese state mechanisms seeking to sabotage the UK’s steel industry. Despite losing operational management, Jingye retains an economic interest in the steelmaker through its shareholding. Sources close to negotiations indicate Jingye’s investments in British Steel have amounted to billions since its 2020 acquisition.

Jingye has retained a small number of staff, including a chef who reportedly has been reassigned to alternative duties from home. Meanwhile, the operational and financial burden now falls on the UK taxpayer, with British Steel previously incurring losses estimated at £700,000 daily. These financial pressures could be exacerbated further if US tariffs on British Steel exports increase next month.

The United States is set to impose a 50 per cent tariff on British Steel products due to concerns over its Chinese ownership. Such measures would impact the company’s annual export of approximately 50,000 tonnes of steel to the US. British Steel is at the centre of US fears that China may exploit the company to redirect exports to American markets. While the Economic Prosperity Deal (EPD) signed in May includes conditions to address these issues, the matter remains unresolved. US officials have warned that July 9 could see the doubled tariffs enacted unless compliance efforts by British Steel are intensified.

Domestically, the government has emphasised its efforts to secure private sector investment to safeguard the steelmaker’s future. Ministers are reportedly collaborating with Jingye and other stakeholders to explore sustainable options for British Steel’s longevity. Parliament is unlikely to approve a resolution before its summer recess on July 22, potentially pushing negotiations to late 2025.

Adding further complications, rival Tata Steel, based in Port Talbot, has also warned of the repercussions of US import rules. The closure of Tata’s blast furnaces last year and its subsequent reliance on semi-finished imports may breach regulations, further risking tariff-free access to the US market. Amid these mounting challenges, the UK steel industry is under considerable pressure to balance international trade requirements while grappling with domestic industrial challenges.

Securing long-term stability for British Steel will require delicate negotiations between the government, Jingye, and external investors, as well as compliance with global trading regulations. Without swift and decisive actions, the company faces an uncertain future characterised by escalating financial losses and dwindling global market access.