The UK’s last-minute takeover of British Steel exposes its reactive approach to economic security

The British government needs a more comprehensive and forward-looking defence-industrial strategy to ensure its national security.

Expert comment Published 30 April 2025 4 minute READ

Olivia O’Sullivan

Director, UK in the World Programme

The UK’s Parliament recently passed emergency legislation to allow the government to take control of the steelworks at Scunthorpe. This intervention was partly focused on protecting jobs and the local economy, but the underlying rationale was in line with a growing trend among governments to see economic and national security as intertwined. 

The decision to intervene was framed in terms of steel’s role in the UK’s defence industry, infrastructure resilience, and broader sovereign economic capability. Scunthorpe is the last UK site able to produce high-quality virgin steel, which is important for transport infrastructure, military equipment, and other types of defence production. 

The UK government, both under Keir Starmer and his predecessors, has taken steps towards incorporating some national security considerations into economic strategy. But the Scunthorpe case highlights some of the limits of the government’s current approach. 

For the UK government, the intervention in Scunthorpe shows that it sees economic security as critical.

British Steel was taken over by a Chinese company called Jingye in 2020, when it was on the brink of insolvency and shutdown, and Jingye emerged as the only viable buyer. 

The imperative of keeping the plant open at the time overrode any concerns about having a Chinese entity control a critical element of national industry, despite different decisions being made for other sectors; the UK banned the Chinese technology company Huawei from parts of the UK’s 5G telecommunications network only months later, under US pressure. 

But five years on, Jingye said it could not keep the plant operational, claiming it was losing £700,000 per day. Rather than risk its closure, the government stepped in. The intervention fell short of nationalising the plant, which the government says requires significant investment that it would likely prefer the private sector take on. Instead, it passed legislation that gives it special powers over the plant’s manufacturing of steel. 

The UK’s reactive economic security policy 

The importance of British Steel meant the government was forced into making a last-minute emergency decision, with few other options to keep the blast furnaces operating. 

This kind of piecemeal, reactive approach to deciding which strategic economic sectors require some public intervention or investment is becoming harder to sustain, especially as states increasingly prioritize national security in shaping economic decisions. 

Globally, governments are acting to increase their sovereign control or capacity in priority economic sectors, such as energy, semiconductors, pharmaceuticals, and indeed, steel. They are motivated not just by economic resilience, but the goal of being able to act independently in times of crisis.

In recent years, the UK government has to some degree followed suit, incorporating tools to block foreign ownership or influence in some economic sectors into its national security framework. 

The 2021 National Security and Investment Act gave ministers new powers to block foreign takeovers of businesses in sectors deemed sensitive. New approaches to supply chain resilience have also been developed, including the 2022 critical minerals strategy, due to be replaced with a new strategy soon. And the new National Protective Security Authority has developed guidance for research funding or partnerships with overseas institutions, aimed at preventing hostile states from influencing or appropriating sensitive or dual-use research.  

But these initiatives show the UK’s strategy has largely been defensive – often focused on blocking or restricting investment or influence in strategic sectors, with fewer long-term measures for actively building or investing in them. 

The government has not articulated a consistent framework for deciding which sectors matter most for national security.

This strategy is starting to look one-sided compared with other states, who have expanded investment or other forms of support for strategic sectors. The US’s vast investment in its domestic chip industry and other green technologies under President Biden is one striking example. But countries with more comparable economies to the UK, such as Australia, have also set out plans for limited industrial policies and state support to crowd investment into industries deemed strategic. 

Part of the UK’s problem is fiscal: the government doesn’t have the same capacity for public investment as many other states, given its existing high public debt, weak growth prospects, and constraints on public spending. 

But it’s also a matter of clarity. The government has not articulated a consistent framework for deciding which sectors matter most for national security. 

This is an inherently difficult task. But without a clearer approach, government policy risks becoming inconsistent and based on short-term political considerations or enforced last-minute decision-making rather than strategic necessity.

Opportunities to set out a broader strategy 

The UK government has arguably been torn between several approaches. In opposition, it made the argument for greater state investment in strategic sectors as a form of ‘securonomics’. But since winning power, the government is grappling with its desire to demonstrate it is sticking to its rules on public spending and debt, while also needing to seek foreign investment in infrastructure in pursuit of growth. 

Looking ahead, the government has opportunities to set out a clearer approach, including in its defence-industrial strategy, expected in the spring of 2025, and its wider industrial strategy, also planned for mid–2025. 

These could be good opportunities to articulate a broader vision, including how the UK plans to support or work with sectors that it deems critical to security. It would be valuable for the defence-industrial strategy to address not only traditional defence contractors, but also upstream capabilities including some types of industrial production and R&D infrastructure.

However, that effort will face challenges. First, defining what counts as ‘critical’ is far from straightforward. In the Scunthorpe case, the government acted because virgin steel is considered essential for some defence applications. But even the production of steel is not entirely self-contained: it relies on imported inputs. Defence and industrial standards and methods also change over time, requiring priorities to be re-calculated. 

These challenges are unlikely to go away, and open economies will always face some exposure to global supply chain shocks and foreign dependencies.

Policymakers need to ask hard questions about which industrial capabilities are genuinely indispensable in a crisis scenario, and which can be procured through alliances. Some capabilities may be able to be discontinued now, but re-established in the future if needed, though this would require the necessary skills, supply chains, and institutional knowledge.

Second, the government must navigate the politics of industrial policy. There is a risk that the line between limited strategic state support on national security grounds, and protectionism or political calculation, gets blurred. The steel industry has long held symbolic political significance and its nationalisation is popular, making it fertile ground for short-term electoral calculations rather than long-term strategy. 

These dynamics are not unique to the UK. In the US, President Biden intervened to block a proposed acquisition of US Steel by a Japanese firm – justified in part on national security grounds, but seen by many as a politically motivated decision aimed at winning union support. President Trump has sent mixed signals on finalising the same decision.

These challenges are unlikely to go away, and open economies will always face some exposure to global supply chain shocks and foreign dependencies. For the UK government, the intervention in Scunthorpe shows that it sees economic security as critical. 

But without moving from a reactive approach to a more long-term strategy, the UK government may be forced into further last-minute decisions that risk both discouraging investment and falling short of the economic resilience that it needs.