A Chinese buy-out marks a new chapter in the tumultuous history of steelmaking in the United Kingdom, which has been characterised by nationalisation, privatisations and recurring crises.
Despite having an economy dominated by the services sector, steelmaking retains a special place in British hearts, where it is an enduring symbol of a bygone golden industrial age.
That explains the huge interest in Monday’s announcement of a buy-out of British Steel by China’s Jingye, which made national headlines even with an election campaign in full swing.
The takeover should be a breath of fresh air for some 4,000 British Steel employees, most of whom work at the Scunthorpe site in northern England.
Professional body UK Steel called it “positive news for British Steel and its workers”, assessing it would go towards “delivering a sustainable future” for the industry.
Jingye for its part has promised to invest £1.2 billion (1.4 billion euros, $1.5 billion) over the next decade, without elaborating on how it will turn around the loss-making firm.
“It’s not a huge investment,” said Jonathan Owens, director of the business and management programme at Salford University, and a former worker at British Steel.
“My worry would be that it is only a short-term investment. Are they just buying the knowledge of the high-quality steel production that goes on at Scunthorpe?”
So far Jingye has only said it would keep on as many employees as possible, without committing to a figure, and said cost-cutting would be necessary.
– Symbolic £1 –
It’s difficult to say if the Chinese group will succeed where others have failed to ensure a future for British Steel, which is responsible for one-third of the country’s production.
British Steel has its roots as far back as the Industrial Revolution but took shape in 1967 when the Labour government nationalised the industry, which at the time employed nearly 270,000 people.
The 1980s were painful, as global demand declined and steel plants turned loss-making. A series of strikes saw the Conservative government under the “Iron Lady” Margaret Thatcher privatise the firm in 1988.
That signalled the start of a long decline that involved deep cuts in the workforce, the closure of sites and the loss of the company’s name before Tata Steel bought it in 2007.
In 2016, the investment fund Greybull Capital bought part of its activities for a symbolic one pound.
Greybull Capital brought back the name British Steel for its long steel products business, mainly in rail and construction, hoping to make it a European leader.
But the dream did not become a reality and it went bust in May this year.
The slump again reflected difficulties in the sector, which now employs no more than about 32,000 people and has been hit by fierce competition from China and uncertainty over Brexit cutting demand from European clients.
– Absent government –
The relaunch of British Steel, which is the second-biggest steelmaker in the country, will face as much scrutiny as the future of Tata Steel, which currently holds the top spot.
The Indian giant has revealed little of its plans for the United Kingdom since the recent failure of a tie-up between its European business and Germany’s Thyssenkrupp, prompting fears for the future of Tata’s Port Talbot plant in south Wales.
Port Talbot employs some 4,000 of Tata’s 8,000 employees in Britain.
A third business is still trying to make its mark, the Liberty House group of the British-Indian tycoon Sanjeev Gupta.
He has quietly built up his portfolio, notably by buying out steelmaking firms in former industrial areas, and is reported to be interested in some British Steel assets.
Another potential investor is the government, although under the ruling Conservatives it has been quieter on big industrial issues in recent years.
“The country benefits hugely from steel production,” said Owens, questioning the lack of government enthusiasm to get involved.
“If we lose the ability to create our own steel it would have huge knock-on impacts. It impacts on the defence industry and hugely on the rail industry. If Scunthorpe goes it would collapse the rail industry in the UK too.”