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“Who was going to blink first? A source involved in the fraught negotiations since the election over the future of British Steel told me that as time passed, and literally, coal to keep the furnaces burning started to run out, that was the question – was the government going to offer even more to the Chinese owners of British Steel, Jingye, or act itself?
On Saturday, the government is changing the law to answer that question. Unless something truly weird happens, Parliament will vote to give Jonathan Reynolds, the business secretary, the power to tell British Steel what to do – in practice, buying coal to keep the once mighty steel industry alive.
Even on Thursday he was offering taxpayers’ cash to buy the raw materials to keep the furnaces alive as a sweetener for Jingye.
At one point in the talks, sources suggest they were asking for a billion-pound taxpayer bailout to keep the plant alive. But I’m told that price wouldn’t have been accompanied by any guarantee that jobs would be saved, or the plant protected for good.
Taking control on Saturday does not do that. The Chinese owners will remain the shareholders, for now. But Labour’s decision literally and metaphorically keeps the flames alive – the government hopes. And it commits taxpayers to start coughing up to save the steel industry – for how long, is a more complicated question…
So what then? Theoretically, Jingye could “get their act together and take the company back”, one insider suggests. Talking to interested parties on Friday night, that seemed vanishingly unlikely.
The UK government has spent the last couple of weeks trying to tempt them to stay on board with huge inducements. That failed, so the chances of getting back involved seem pretty slim.
There is the possibility that another company wants to swoop in and rescue the business.
Again, don’t hold your breath – the company has been losing money hand over fist, the blast furnaces are nearing the end of their useful life, and the cost of energy it gulps is enormous.
So in the current state, taking on the business as an offer? It’s not that pretty…
But – “the hurdles are huge” – a source tells me. The most obvious obstacle? Cold hard cash, way beyond the initial price tag for raw materials to keep Scunthorpe going for a few more weeks.
In the long term, the blast furnaces are near the end of their life, the plant needs investment, massive investment, to make it safe and to have a proper future.
One industry source told me modern electric furnaces could have a price tag as as much as £3bn each, and Scunthorpe might need two…
The government hasn’t yet shared, or hasn’t yet worked out, what the potential cost of taking on the plant in the long term might be. A Treasury source says it will have to be within the current plans for spending…
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