The government’s £2.5bn steel fund is being squeezed from all sides, with the insolvency of Liberty Steel in August compounding the crisis at British Steel. Business Secretary Peter Kyle confirmed “hundreds of millions” have already been spent from the fund to “keep operations going” at both manufacturers.
This financial drain is severely limiting the government’s options as it drafts a new steel strategy. The fund, pledged in the 2024 election, was intended for capital investment, but is instead being used as an emergency lifeline.
This spending “probably mean[s] less money for capital investment,” the text notes, at the exact moment the government wants to fund a costly switch to electric arc furnaces (EAFs) at Scunthorpe.
Kyle, despite the financial pressure, is pushing ahead, stating he believes EAFs will be built. This is seen as the only long-term path for the Scunthorpe plant, which the government rescued from its Chinese owner, Jingye Steel, in April.
The financial pressure makes the other challenges even harder to solve. The EAF plan threatens thousands of jobs, and the government is also considering a “financially dubious” hydrogen (DRI) plant to save primary steelmaking. With Liberty Steel and British Steel both draining the pot, funding this “clear future vision” is becoming increasingly difficult.
