China’s Jingye seeks compensation from UK over British Steel takeover | British Steel
The Chinese owner of British Steel has launched a formal process under an international agreement to receive compensation from the UK government for its decision to nationalize the Scunthorpe steelworks.
Jingye Steel said China would try to get the money back through its bilateral investment agreement with Britain, after more than a year of talks over the size of any payment. The dispute could put pressure on relations between China and the UK.
The decision to seek a solution under the UK-China investment deal is expected to give Jingye an advantage in negotiations. In June last year he announced plans to bail out British Steel’s debt of up to £711 million, but industry insiders said the company wanted more than £1 billion.
Keir Starmer announced that the UK government took control of British Steel on national security grounds last April, saying it was vital that the country maintain its ability to produce steel from iron ore at the company’s facility in Scunthorpe, Lincolnshire.
Insiders suggested fears of immediate redundancies for 2,700 jobs in the storied British industry also played a more significant role. Jingye had planned to shut down the plant within a few days, making it impossible to reopen and causing huge losses.
Since the takeover, Jingye has remained the economic owner of the facilities. But Starmer, who is under pressure to resign after last month’s disastrous local elections, said the government planned to fully nationalize British Steel, a rare privately owned asset.
According to Reuters, Jingye said in his statement on his WeChat account that he “recently initiated consultation procedures within the scope of the bilateral investment agreement with the British government.”
The company hopes that the UK government can fully protect the legitimate rights and interests of Jingye and other Chinese businesses, as well as global investors, the statement said.
Jingye acquired British Steel in a government-brokered deal in 2020, but the company has struggled with a global metal glut, mainly as a result of overcapacity in China.
According to the China-UK agreement, after a period of six months, the dispute can be sent to an international arbitrator to decide. As Jingye prepares to exit the Scunthorpe steelworks, the UK takeover may have increased the possibility of getting some money back.
The UK has since announced plans to significantly reduce the amount of steel that can be imported into the country duty-free. This could make British Steel a much more attractive business, industry sources said.
The government is expected to seek new private owners for British Steel after it was under national ownership for a short time. Any new business owner will likely demand large subsidies to invest in the new electric arc furnaces needed to decarbonize the company’s products.
The government was contacted for comment.
