Why Britain nationalised British Steel despite Chinese outrage 

(Edited and refined by Grace Chong, with the assistance of AI translation.)

Last week, under the newly enacted Steel Industry (Nationalisation) Act, the UK announced that it would bring British Steel back into public ownership, six years after it was acquired by China’s privately owned Jingye Group. Coming on the eve of Andy Burnham’s arrival as prime minister, the move has cast a shadow over the recent improvement in China-UK relations.

China’s commerce and foreign ministries responded swiftly, urging the UK to treat Chinese-invested companies fairly and impartially. They also voiced support for Jingye in pursuing legal action to protect its rights, saying Beijing would take firm measures to safeguard the interests of Chinese enterprises.

A costly bet 

Hebei-based steelmaker Jingye Group stepped in to acquire British Steel in 2020, when the century-old company was facing bankruptcy. According to public reports, Jingye paid between 53 million pounds (US$71 million) and 70 million pounds for the acquisition.

British Steel’s main assets include its steelworks in Scunthorpe, northeast England. The plant is a pillar of the local economy, employing around 2,700 people. It also houses the UK’s only two remaining blast furnaces capable of producing virgin steel from iron ore.

Jingye says that in the five years since taking over British Steel, it has invested more than 1.2 billion pounds to keep the company running. Despite that, the business continued to struggle, losing around 700,000 pounds a day.

As losses mounted and the investment became increasingly difficult to sustain, Jingye proposed closing the blast furnaces and replacing them with electric arc furnaces. But it was unable to reach an agreement with the British government over financial support.

With the situation becoming increasingly urgent, the UK Parliament took the rare step of holding an emergency sitting during recess in April last year. It quickly passed legislation to take control of British Steel’s operations, before formally nationalising the company this month.

Why did Britain choose nationalisation?

The decision sparked strong reactions in China, with some commentators comparing it to a modern version of The Farmer and the Viper — a betrayal of those who offered help.

Chinese critics argued that British Steel had changed hands several times without resolving its longstanding financial problems. The British government had searched extensively for a buyer, but prospective investors repeatedly walked away before Jingye stepped in to rescue the historic steelmaker in 2020.

They contend that Jingye not only continued investing in modernising the business but also safeguarded thousands of jobs. In the company’s own words, it ensured employees were paid in full and on time, “without making a single compulsory redundancy and without missing a single wage payment. Jingye’s word is its bond.”

From this perspective, it was the British government — not Jingye — that failed to honour its commitment to co-invest before moving to seize control of the company and ultimately nationalising it.

The British government has, in fact, been absorbing British Steel’s losses since taking over its operations in April last year. Official figures show that keeping the Scunthorpe steelworks running costs the government around 1.3 million pounds a day.

Given the mounting financial burden — and criticism that Britain cast Jingye aside after benefiting from its investment, while disregarding market principles and contractual commitments — why did the government press ahead?

The Labour government has repeatedly argued that keeping the Scunthorpe blast furnaces operating is essential to Britain’s industrial security and critical manufacturing capabilities.

A broader shift towards security-driven economics

That said, British Steel’s nationalisation cannot simply be characterised as an act of expropriation. Reports indicate that former Business Secretary Peter Kyle has announced the appointment of independent experts to assess compensation for Jingye, while the company has begun consultation proceedings under the China-UK bilateral investment treaty.

How negotiations will unfold, how much compensation will ultimately be awarded, whether it will satisfy Jingye, and whether the dispute could develop into a prolonged legal battle remain uncertain.

What is clear is that the British Steel dispute will be an early test for Burnham in managing relations with China. During his time as Mayor of Greater Manchester, Burnham consistently promoted economic cooperation with China at the regional level. How he balances that pragmatic approach with growing domestic national security concerns remains to be seen.

Jingye’s experience with British Steel is far from an isolated case of Chinese companies encountering government intervention overseas in recent years.

The US previously ordered ByteDance to divest TikTok’s US operations on national security grounds. In Europe, the Dutch government also invoked national security last year when it intervened in the ownership of chipmaker Nexperia, requiring the company to separate from its Chinese parent, Wingtech Technology.

More recently, Australia issued divestment orders requiring several shareholders with links to China to sell their stakes in rare earths producer Northern Minerals, citing the need to protect strategic resource supply chains.

The motivations behind these actions differ. Some are driven by concerns over data privacy and information manipulation; others aim to strengthen industrial chain resilience and reduce external constraints. Some seek to protect intellectual property and preserve the competitiveness of critical technologies, while others are intended to avoid becoming caught in great power rivalry.

Nor is the use of administrative measures to protect strategic industries on security grounds limited to Western countries. Beijing’s decision in April this year to halt Meta’s acquisition of AI company Manus — founded in China before relocating to Singapore — is another example. Even completed transactions can be reversed by government intervention.

Years of intense strategic competition between China and the US have seen both sides use strategic resources such as rare earths and core technologies such as semiconductors as leverage against each other. The result has been a broader shift in which economic issues are increasingly viewed through a national security lens.

In areas such as strategic resources, sensitive data and critical technologies, security considerations are increasingly taking precedence over economic ones.

The end of predictable globalisation?

As more governments make decisions shaped by geopolitical considerations and the pursuit of supply chain autonomy, while increasingly using administrative powers to intervene in commercial activity, the traditional business logic of cost, return and efficiency is being upended. In its place, companies must increasingly factor in the nationality of capital, the state of diplomatic relations and the level of political trust when making investment decisions.

The expanding use of national security to justify economic intervention may compel countries to place strategic security above economic considerations. In turn, the stable rules and predictability that once characterised open economies may gradually slip away.

This article was first published in Lianhe Zaobao as “从安世到英钢”.

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