Ministers ask Hunt for £300m to avert mass British Steel job losses

Ministers are urging the chancellor to provide £300m of taxpayers' money to avert the closure of British Steel’s two blast furnaces – a move that would trigger the loss of thousands of industrial jobs in northern England.

Paste BN has learnt that Grant Shapps, the business secretary, and Michael Gove, the levelling-up secretary, wrote to Jeremy Hunt this month to warn that the demise of British Steel could cost the government up to £1bn in decommissioning and other liabilities.

In their letter, a copy of which has been seen by Paste BN, Mr Hunt was asked to consider the economic case for supporting both British Steel, which is owned by a Chinese conglomerate, and the wider UK steel industry.

"Every other G20 nation has maintained domestic steel production and, while we do not think that this should come at any cost, we do believe it is in HMG's interest to offer well-designed and targeted funding which unlocks private investment, achieves a good outcome for taxpayers, and enables transformed, decarbonised and viable domestic steel production to continue in the UK in the long-term," Mr Shapps and Mr Gove wrote.

"We do not want to become reliant on steel sources elsewhere in the same way that energy security has become self-evidently important.

"Moreover, our steel requirement will increase by 20% due to large domestic infrastructure projects already committed to in the UK."

One industry source briefed on the discussions in Whitehall said the chancellor had instructed Treasury officials to scrutinise the request.

The letter to Mr Hunt warned that British Steel "does not have a viable business without government support".

"Closing one blast furnace would be a stepping-stone to closure of the second blast furnace, resulting in a highly unstable business model dependent on Chinese steel imports," Mr Shapps and Mr Gove wrote.

"The local economic impact of closing both blast furnaces is estimated to be in the region of £360m to £640m, with a further £500m to £1bn liability for HMG through compulsory liquidation, insolvency and land liabilities (though £40m could potentially be raised through asset recovery".

"Given the magnitude of the liabilities due to fall on HMG in the event of blast furnace closure, and following the PM's steer, we would like officials to test whether net government support in the region of £300m for British Steel could prevent closure, protect jobs and create a cleaner viable long-term future for steel production in the United Kingdom."

The fate of British Steel, which was bought by Jingye Group out of a previous insolvency process less than three years ago, has become increasingly unclear in recent months as the current owners have indicated that they would not maintain its operations without taxpayer funding.

British Steel employs about 4,000 people, with thousands more jobs in its supply chain dependent upon the company.

According to the letter to Mr Hunt, British Steel has already informed the government that it could close one of the Scunthorpe blast furnaces as soon as next month, with the loss of 1,700 jobs.

This would be "followed by the second blast furnace closing later in 2023, creating cumulative direct job losses of around 3,000", Mr Shapps and Mr Gove wrote.

The plea to Mr Hunt followed a round of talks between Mr Shapps and Jingye earlier in December about supporting Britain's second-largest steel producer.

Mr Shapps' predecessor, Jacob Rees-Mogg - who lasted just weeks as business secretary under Liz Truss - opened formal talks with Jingye in October about the provision of