The UK’s last-minute takeover of British Steel exposes its reactive approach to economic security

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The UK's last-minute takeover of British Steel exposes its reactive approach to economic security

The UK's last-minute takeover of British Steel exposes its reactive approach to economic security
Expert comment
thilton.drupal
30 April 2025

The British government needs a more comprehensive and forward-looking defence-industrial strategy to ensure its national security.



The UK's Parliament recently passed emergency legislation to allow the government to take control of the steelworks at Scunthorpe. This intervention was partly focused on protecting jobs and the local economy, but the underlying rationale was in line with a growing trend among governments to see economic and national security as intertwined. 

The decision to intervene was framed in terms of steel's role in the UK's defence industry, infrastructure resilience, and broader sovereign economic capability. Scunthorpe is the last UK site able to produce high-quality virgin steel, which is important for transport infrastructure, military equipment, and other types of defence production. 

The UK government, both under Keir Starmer and his predecessors, has taken steps towards incorporating some national security considerations into economic strategy. But the Scunthorpe case highlights some of the limits of the government's current approach. 

For the UK government, the intervention in Scunthorpe shows that it sees economic security as critical.

British Steel was taken over by a Chinese company called Jingye in 2020, when it was on the brink of insolvency and shutdown, and Jingye emerged as the only viable buyer. 

The imperative of keeping the plant open at the time overrode any concerns about having a Chinese entity control a critical element of national industry, despite different decisions being made for other sectors; the UK banned the Chinese technology company Huawei from parts of the UK's 5G telecommunications network only months later, under US pressure . 

But five years on, Jingye said it could not keep the plant operational, claiming it was losing £700,000 per day. Rather than risk its closure, the government stepped in. The intervention fell short of nationalising the plant, which the government says requires significant investment that it would likely prefer the private sector take on. Instead, it passed legislation that gives it special powers  over the plant's manufacturing of steel. 
The UK's reactive economic security policy 
The importance of British Steel meant the government was forced into making a last-minute emergency decision, with few other options to keep the blast furnaces operating. 

This kind of piecemeal, reactive approach to deciding which strategic economic sectors require some public intervention or investment is becoming harder to sustain, especially as states increasingly prioritize national security in shaping economic decisions. 

Globally, governments are acting  to increase their sovereign control or capacity in priority economic sectors, such as energy, semiconductors, pharmaceuticals, and indeed, steel . They are motivated not just by economic resilience, but the goal of being able to act independently in times of crisis.

In recent years, the UK government has to some degree followed suit, incorporating tools to block foreign ownership or influence in some economic sectors into its national security framework. 

The 2021 National Security and Investment Act gave ministers new powers to block foreign takeovers of businesses in sectors deemed sensitive. New approaches to supply chain resilience have also been developed, including the 2022 critical minerals strategy , due to be replaced with a new strategy soon. And the new National Protective Security Authority has developed guidance  for research funding or partnerships with overseas institutions, aimed at preventing hostile states from influencing or appropriating sensitive or dual-use research.  But these initiatives show the UK's strategy has largely been defensive – often focused on blocking or restricting investment or influence in strategic sectors, with fewer long-term measures for actively building or investing in them. 

The government has not articulated a consistent framework for deciding which sectors matter most for national security.

This strategy is starting to look one-sided compared with other states, who have expanded investment or other forms of support for strategic sectors. The US's vast investment  in its domestic chip industry and other green technologies under President Biden is one striking example. But countries with more comparable economies to the UK, such as Australia, have also set out plans for limited industrial policies  and state support to crowd investment into industries deemed strategic. 


Source: https://www.chathamhouse.org/2025/04/uks-last-minute-takeover-british-steel-exposes-its-reactive-approach-economic-security Apr 30, 2025, 06:38 AM