China has launched a blistering attack on the British government’s decision to nationalise British Steel, warning that the move has dealt “a severe blow to Chinese companies’ confidence in investing in the UK”.
On Thursday, the UK government took the loss-making steelmaker into public ownership, saying the move was essential to protect “the future of steel production” at its site in Scunthorpe, Lincolnshire, and to safeguard UK supply chains. The Department for Business and Trade described it as protecting “a vital national capability”.
“China ‘firmly opposes’ British Steel nationalisation, warning it undermines investor confidence and strains UK-China relations.”
But China’s commerce ministry hit back on Friday, stating it “firmly opposes and is strongly dissatisfied with the British government’s decision”. A spokesperson told the Chinese media outlet Global Times that the UK had “forcibly taken control of British Steel and subsequently nationalised the company in the name of national security, seriously undermining Jingye’s legitimate rights and interests”. Jingye, the Chinese group that owned British Steel, has previously said the business was losing £700,000 a day.
The nationalisation comes 15 months after the Labour government recalled parliament to prevent the closure of the Scunthorpe steelworks, which threatened 4,000 jobs. At the time, Jingye had been prepared to walk away. The UK first took operational control last year but Jingye retained ownership, limiting the government’s ability to steer the company’s future.
Now, with full public ownership, the government has the power to decide the plant’s future. Small Business Minister Blair McDougall told the House of Commons on Thursday that an independent valuer would be appointed in the autumn “to make a judgment on any compensation that is due, and that could be nil”. Jingye is seeking compensation, arguing in its UK accounts that British Steel remains a valuable asset.
The dispute threatens to strain relations between London and Beijing just as incoming prime minister Andy Burnham is set to enter Downing Street on Monday. The China-UK Bilateral Investment Treaty, signed in 1986, is a legally binding agreement designed to promote and protect investments. Beijing has called on Britain to “faithfully fulfil” its obligations under the treaty.
A UK government spokesperson said on Friday that negotiations with Jingye had been held but “it wasn’t possible to reach an agreement that represented value to the taxpayer”. The spokesperson added: “We highly value our relationship with China and remain open to Chinese investment.”
China’s commerce ministry said it would “closely follow developments, support Chinese companies in safeguarding their rights through legal means, and take strong measures to firmly protect the interests of Chinese companies”. It did not specify what those measures might involve.