China has criticised the UK government's decision to nationalise British Steel, saying the move infringes on the rights of its Chinese owner, Jingye Group, and could damage Chinese investors’ confidence in Britain.
The criticism came a day after the UK government said it would take the financially troubled steelmaker into public ownership, saying the move was necessary to protect thousands of jobs and preserve a strategic domestic steelmaking capability.
The UK government took operational control of British Steel’s Scunthorpe plant last year, but the company remained owned by Jingye Group. Full nationalisation would give ministers a greater say in the company’s future.
The UK’s move “seriously violated the legitimate rights and interests of Jingye”, the ministry said in a statement issued Friday. The ministry urged Britain to abide by its obligations under the China-UK Bilateral Investment Treaty, which was signed in 1986 to safeguard cross-border investments.
Jingye was contributing to the UK economy, but the ministry said the British had taken control of the company on the grounds of national security. Beijing said it would continue to monitor the situation and support Chinese companies’ legal rights but did not specify what measures it might take.
The row adds another dimension to UK-China relations at a politically sensitive time. Britain’s next government will have to balance economic engagement with China against concerns about national security and strategic industries.
A UK government spokesperson said ministers had negotiated with Jingye but had not been able to reach an agreement that delivered value for taxpayers. “We value our relationship with China and are open to Chinese investment,” the spokesperson said.
The nationalisation comes after legislation was passed by Parliament enabling the government to take steel companies into public ownership when it is considered to be in the public interest.
Jingye is considered likely to seek compensation. The company had previously said British Steel was losing about £700,000 a day. Blair McDougall, the Small Business Minister, told Parliament an independent valuer will assess any compensation later this year and said the amount awarded "could be nil".
Being publicly owned means the government has more freedom to decide the fate of the Scunthorpe plant and keep its blast furnaces running. However, ministers have said they would rather not run the business for ever.
The National Audit Office said the Scunthorpe steelworks was costing taxpayers around £1.3 million a day as of March. Business Secretary Peter Kyle said the government would continue to cover the operating expenses in the short term.
The Scunthorpe site directly employs around 2,700 people and supports thousands more jobs throughout the supply chain.
The plant is also of strategic importance, as it is currently the only producer of virgin steel in Britain using blast furnaces. Without Scunthorpe, the UK would be the only G7 country without any home-grown virgin steel production.
Most other steel production in the UK is now carried out in electric arc furnaces, which use scrap steel as a raw material and have lower carbon emissions. The government is committed to a long-term shift towards electric arc furnace technology, but ministers argue that Scunthorpe remains vital because it produces specialist steel products not currently made elsewhere in the UK, including materials used by Network Rail and the construction industry.
Officials say the move to keep the plant open is to ensure there is no disruption to supply and to cut reliance on imported steel while alternative domestic production capacity is developed.
British Steel remained state-owned until Prime Minister Margaret Thatcher privatised it in 1988.
