A Chinese steel giant on Sunday sought compensation from the United Kingdom government, claiming its acquisition of its subsidiary British Steel was “outright robbery”.
The UK government took over operational control of British Steel last year after owner Jinghe Group warned that Britain’s last factory capable of making steel from scratch was no longer financially viable.
What did Jinghe say?
In a statement on social media on Saturday, Jinghe threatened legal action against the UK government, accusing ministers of “crushing international investment rules”.
Describing the nationalization as “outright robbery”, the Chinese company said it “reserves all legal rights, firmly protects its legitimate rights and interests, and will pursue full compensation through legal means to the end.”
“The UK disregarded Jinghe’s sustained investment and significant contributions and was only willing to pay almost zero compensation,” the statement added.
The company noted that nationalization could cost UK taxpayers more than £1.5 billion ($2.02 billion, €1.76 billion) by 2028.
Jinghe said it has started the process of seeking damages under bilateral investment agreements, but it has not taken it any further.
China’s Foreign Ministry supported the compensation move, calling on Britain to “sincerely 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 seize control of British Steel?
Jinghe had planned to close the blast furnace at its plant in Scunthorpe in northern England last year after the UK government passed emergency measures allowing it to take operational control of British Steel.
The immediate concern was that the blast furnaces would close permanently, ending the UK’s ability to produce virgin or primary steel from raw materials. The plant houses the majority of British Steel’s operations.
The government cited national security for the move, which came five years after Jinghe bought British Steel from a London-based private equity firm for about £70 million.
Ministers cited the need to protect strategic steel supplies for construction, rail infrastructure and defence.
The move was also seen as a way to protect thousands of jobs in a deprived area of Britain. The Scunthorpe plant currently employs around 2,700 people.
In recent weeks, the UK Parliament passed legislation that on Thursday allowed the government to bring British Steel under full public ownership.
Under the new law, an independent evaluator will have to assess whether any compensation is due to Xinghe.
British Steel: Moving away from state and market control
The UK steel industry was nationalized after the Second World War, including the Scunthorpe facilities, which had been producing steel since the late 19th century.
The sector returned to private hands in 1988 under the leadership of the late Prime Minister Margaret Thatcher and has since changed hands several times due to high operating costs, fierce competition and massive losses due to overcapacity.
The British Steel brand was revived in 2016 by Greybull Capital, which bought the company for £1 and turned a profit for a short time.
But later after the company filed for bankruptcy, it was acquired by China’s Jingye Group in 2020.
Despite Jinghe’s reported £1.2 billion investment, the company said the Scunthorpe plant was still losing around £700,000 per day.
Edited by Richard Connor