UK steel industry: statistics and policy

A combination of fierce international competition, global steel supply exceeding demand, and high domestic costs has made many UK steel plants struggle to be competitive in a global market. Decarbonisation of steel manufacturing in the UK requires large investment. Restructuring of steel mills is putting pressure on jobs, while highlighting the need for government strategy and policy.

This briefing outlines the scale of the UK steel industry, issues facing the sector in recent years and government policy on the sector.

The industry in 2023

In 2023 the UK steel industry contributed £2.3 billion to the UK economy in terms of gross value added (GVA). This was equivalent to 0.1% of total UK economic output and 1.0% of manufacturing output.

There are 1,160 businesses in the UK steel industry, directly supporting 40,000 across the country, 0.1% of all jobs.

Considering the global output of crude steel in 2023, the UK produced 5.6 million tonnes, 0.3% of the world’s total; China produced 1,019 million tonnes, 54% of global production. The EU produced 126 million tonnes of steel, 7% of the world total. Compared with the EU countries, the UK ranked the eighth largest steel producer, after Germany, Italy, Spain, France, Austria, Poland and Belgium.

Issues for the UK steel industry

Excess capacity in the global steel industry has created a glut of steel on the international market. This has pushed steel prices down, putting pressure on the UK steel industry, where overheads, especially electricity prices, are higher than in some other countries.

The sector consistently calls for more government action, especially regarding energy costs, public procurement and protecting the UK market from imports of steel produced to lower emission standards. The steel industry is also calling on the government to support its transition to lower carbon steelmaking, where the manufacturing process has lower environmental impact compared to the traditional processes.

Government policy on steel

The government announced on 11 September 2024 that it will introduce a new steel strategy in the spring of 2025. It aims  “to ramp up investment, strengthen our supply chains and create more well-paid jobs in the places where they’re most needed” but does not intend to “prioritise short-term subsidies over long-term jobs.”

The government sees the steel industry’s transition to low-carbon steelmaking as essential to reaching the UK’s net zero goals. It has said it aims to support domestic steel manufacturing through public procurement and look at the high electricity prices in the UK.

The government will reserve £2.5 billion for steel, in addition to the £500 million for the transformation at Port Talbot agreed by the previous government. It is not clear to what extent the funds will overlap with the funding of the newly created National Wealth Fund (NWF), which will have at least £5.8 billion for investment in green steel, green hydrogen, carbon capture and other projects, part of which will affect the steel industry.

The previous government responded to the difficulties in the industry over the past eight years with several policy initiatives.

This included using public procurement policy to support the sector. For example, in 2016 the government introduced a Steel public procurement pipeline, which collates information on government infrastructure projects. This is intended to help steel manufacturers to plan for future demand.

Energy intensive industries such as steel have access to a compensation mechanism for indirect costs incurred (through higher electricity prices) from carbon reduction polices, such as the carbon price floor, the climate change levy, renewables obligation and feed-in-tariffs.

Following the UK’s exit from the EU, the government implemented a trade remedies policy for steel aimed at protecting domestic manufacturers from a surge in imported steel.

Besides these initiatives, targeted funding has been available to support green technologies and net zero transition.

Decarbonisation of the steel industry

The steel industry is a significant contributor to greenhouse gas emissions. It is responsible for 13.4% of greenhouse gas emissions from manufacturing, and 2.2% of total UK greenhouse gas emissions. This is a high proportion given the industry’s overall share in the economy. Decarbonisation of steelmaking is an important part of reaching the government’s target to achieve net-zero greenhouse gas emissions in the UK by 2050. Steel is also an important part of a low-carbon economy, necessary to make wind turbines, electric vehicles, energy-efficient products and infrastructure.

As part of the decarbonisation trajectory, Tata Steel is closing its blast furnace steelmaking in Port Talbot  in South Wales to replace it with less carbon-intensive electric arc furnaces (EAF), which need fewer people to operate. Over 2,800 jobs are expected to go at Tata Steel locations across the UK over the coming three years, starting in 2024. Similarly, British Steel is planning to replace its blast furnaces in Scunthorpe by 2025 and replace them with a single EAF in Scunthorpe and one at Teesside, with consequences for jobs.

This has raised concerns about the future of the sector in the UK and the impact of transition to electric arc steelmaking on employment and local communities. There are also concerns about the potential loss of the UK’s ability to produce primary steel (from iron ore as opposed to steel scrap), and sufficient access to steel scrap.