The UK government’s £2.5 billion steel industry fund is already being drained by operational costs, Business Secretary Peter Kyle confirmed, even as he backs a move to expensive new green technology. “Hundreds of millions” have been spent keeping British Steel and Liberty Steel running, raising questions about the budget for a major overhaul.
Kyle endorsed a shift to electric arc furnaces (EAFs) at the state-controlled Scunthorpe plant, a move that requires significant capital investment. Despite the dwindling funds, Kyle expressed confidence, stating, “I do,” when asked if he expects to see EAFs built there.
This push for modernisation is part of a forthcoming December steel strategy, forced by a “slew of crises” including global oversupply and trade tariffs. The goal is to secure a long-term, low-carbon future for the plant, which was rescued from potential closure by its Chinese owner, Jingye Steel, in April.
However, the cost of the transition isn’t just financial. The move to EAFs places thousands of blast furnace jobs at risk. Unions, recalling the deep cuts at Tata Steel, are demanding a “just transition” that protects livelihoods.
Furthermore, the EAF plan threatens the UK’s “primary steelmaking” capacity. To counter this, the government is considering an even costlier investment in a Direct Reduced Iron (DRI) facility using green hydrogen. Industry sources, however, remain skeptical about the financial viability of this high-tech add-on.