The Chinese owner of British Steel has rejected a £500m state rescue package in a move which raises fresh doubts about thousands of steel industry jobs.
Sky News has learnt that the offer was made by Jonathan Reynolds, the business secretary, in a letter sent to Jingye Group on Monday.
The proposal – aimed at facilitating the Scunthorpe-based group’s transition to green steel production – follows years of talks aimed at salvaging the future of the UK’s second-biggest producer.
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Sarah Jones, the industry minister, told a committee of MPs on Wednesday afternoon that an offer had been made by the government earlier this week, and it had been rejected by Jingye.
“We are still in talks with them at the moment,” she told the business and trade select committee.
The minister did not disclose the size of the offer, but Whitehall sources confirmed that it was £500m – equivalent to the sum awarded to the larger Tata Steel as part of a £1.25bn package finalised last year.
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Government sources said the offer had been calibrated after protracted discussions between ministers, officials and their advisers lasting many months.
However, the £500m package falls well short of the sum that Jingye has been seeking from the government during several rounds of talks since Labour won last summer’s general election.
The Chinese-owned group is thought to have requested £1bn or more from ministers – double the amount handed to Tata Steel, owner of the Port Talbot steelworks in South Wales, last autumn.
The gap between the government’s offer and Jingye’s demands means that thousands of steel jobs could yet be at risk.
British Steel, which was taken over by Jingye in 2020 after a spell in public ownership, employs about 3,500 people at its sites in Scunthorpe, Teesside and elsewhere.
It has been pushing for taxpayer funding to support a transition to green steelmaking by replacing Scunthorpe’s two blast furnaces with cleaner electric arc furnaces.
The rejection of the £500m offer leaves Scunthorpe’s future on a knife edge.
It is unclear whether the government is prepared to increase the amount of money it hands to Jingye, despite Ms Jones’s insistence that discussions are ongoing.
Asked whether British Steel’s blast furnaces would continue operating during negotiations, she said: “Our preference would be for them to keep going; until at the least they have secured the volume of steel imports to keep the mills going.
“Our preference would be that this steel is secured before they close these furnaces.”
Without the injection of funding from government that it had sought, Jingye may argue that its loss-making operations are no longer viable and opt to close the blast furnaces without the financing in place to replace their output.
Reports late last year suggested that nationalisation was an option being explored by ministers.
The government’s proposal comes at a deeply sensitive time for Britain’s steel industry, with fears of swingeing US tariffs exacerbating concerns that the sector’s viability will be put at risk.
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Earlier this month, Sharon Graham, general secretary of the Unite union, called on ministers to designate steel as critical national infrastructure: “Our government must act decisively to protect the steel industry and its workers following the announcement of US tariffs.
“This is a matter of national security.
“Given the importance of steel to our economy and our everyday lives it is vital it is designated as critical national infrastructure and rules are introduced to ensure that the public sector always buys UK produced steel.”
Last month, Mr Reynolds published the government’s Plan for Steel consultation, which will include up to £2.5bn in funding for the industry, in line with a commitment in last year’s Labour election manifesto.
“The UK steel industry has a long-term future under this government,” he said.
“Britain is open for business, and this government has committed up to £2.5bn to the future of steel to protect our industrial heartlands, maintain jobs, and drive growth as part of our Plan for Change.”
During the same month, Mr Reynolds held further talks with Jingye Group’s boss, Li Huiming, in the latest chapter of a negotiation which has been dragging on for more than two years.
British Steel was bought by Jingye the year after it was placed into compulsory liquidation.
The company had been owned by private investment firm Greybull Capital.
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British Steel declined to comment, while the Department for Business and Trade has been approached for comment on the details of its offer to Jingye.
