The UK government took over British Steel last year to prevent the closure of the country’s last primary steelmaking facility. China’s Jingyi Group, which bought the company in 2020, claims it deserves compensation.
A Chinese steel giant demanded damages from the UK government on Sunday, claiming that the state’s takeover of its subsidiary, British Steel, amounted to “outright theft”.
The UK government took operational control of British Steel last year, after owner Genji Group warned that Britain’s last factory capable of making steel from scratch was no longer financially viable.
What did Jinji say?
In a statement on social media, Jinghe threatened legal action against the UK government, accusing ministers of “trampling on international investment rules”.
The Chinese company described the nationalization process as “total theft” and said that it “reserves all legal rights, vigorously defends its legitimate rights and interests, and will seek full compensation through legal means until the end.”
“The UK ignored Jingye’s continued investment and significant contribution and was only willing to offer almost zero compensation,” the statement continued.
The company noted that nationalization could cost UK taxpayers more than 1.5 billion pounds ($2.02 billion, 1.76 billion euros) by 2028.
Jingye said it had initiated a procedure under bilateral investment agreements to seek compensation, without expanding further.
China’s Foreign Ministry supported the compensation move, calling on the UK to “earnestly respect market principles and the spirit of the contract, and find solutions on compensation and other issues acceptable to both sides.”
Why did the UK take control of British Steel?
After Genji last year planned to shut down blast furnaces at its plant in Scunthorpe, in northern England, the UK government issued emergency measures, allowing it to take operational control of British Steel.
The immediate concern was that the blast furnaces would be closed permanently, ending the UK’s ability to produce raw steel or primary steel from raw materials. The plant represents the vast majority of British Steel’s operations.
The government attributed the move to national security, which came five years after Jingye bought British Steel from a London-based private equity firm for about £70 million.
The ministers noted the need to protect strategic steel supplies for construction, railway infrastructure and defence.
The move was also seen as a way to protect thousands of jobs in a deprived area of the UK. The Scunthorpe factory currently employs around 2,700 people.
In recent weeks, the UK Parliament passed legislation that allowed the government on Thursday to bring British Steel into full public ownership.
Under the new law, an independent appraiser must evaluate whether any compensation is payable to Jingye.
British Steel: Reeling from State and Market Control
The UK steel industry was nationalized after World War II, including facilities at Scunthorpe, which had been producing steel since the late 19th century.
The sector returned to private hands in 1988 under the late Prime Minister Margaret Thatcher, and has since changed ownership several times due to huge losses caused by high operating costs, fierce competition and excess capacity.
The British steel brand was revived in 2016 by Greybull Capital, which bought the company for £1 and briefly turned a profit.
But after the company later filed for bankruptcy, it was acquired by China’s Jingye Group in 2020.
Despite the £1.2bn investment announced by Genji, the company said the Scunthorpe plant was still losing around £700,000 a day.
Source: Deutsche Welle
