The £2.5 billion fund the government pledged for the steel industry’s future is in peril, with Business Secretary Peter Kyle confirming “hundreds of millions of pounds” have already been spent just to keep British Steel and Liberty Steel afloat. This admission casts a dark shadow over plans for a costly green transition.
The fund, a centrepiece of the government’s 2024 election manifesto, was intended for capital investment—specifically, to help the industry modernise. Instead, it’s being used as an emergency bailout pot. The text notes this “would probably mean less money for capital investment.”
This financial black hole is forming at the worst possible time. Kyle has just endorsed an expensive switch to electric arc furnaces (EAFs) at the state-controlled Scunthorpe plant. This transition requires massive upfront capital, which the fund was supposed to provide.
Furthermore, the government is also considering an additional investment in a “financially dubious” Direct Reduced Iron (DRI) plant. This would be necessary to preserve the “primary steelmaking” capability that unions are demanding, adding another huge expense to the bill.
As Kyle prepares his December steel strategy, he faces a harsh reality. The “slew of crises” in the global market has forced the government to spend its investment fund on survival. The new strategy must now find a way to fund a green revolution with a pot that is already half-empty.