UK Government’s Steel Gambit Risks Being Undone by Trade War

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“We need to respect international rules, but not when it’s at the expense of our national interest, when increasingly that’s the direction other countries are going,” she said. “You need other partners to be playing by the same rules, and when others are not playing by these rules, you’re just shooting yourself in the foot.”

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The UK government has begun to express a more hawkish stance on trade since Donald Trump unleashed his tariff war, with Chancellor of the Exchequer Rachel Reeves saying this week that Trump is right to try to address global supply imbalances.

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“There is a feeling that the system we have today does not work for all,” Reeves said in Washington on Thursday. “It does matter where things are made.” However, she said the UK doesn’t believe in using tariffs and trade wars as a remedy.

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The intervention to save the Scunthorpe site is one of the most high-profile cases so far of the UK Labour government’s more activist stance on industrial policy, compared to the previous 14 years of Conservative rule, which saw piece-meal efforts to support the nation’s steel sector as it suffered decline.

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It was a move that has potential for short-term political gain. Scunthorpe was one of the so-called ‘Red Wall’ constituencies in Britain’s industrial heartlands that swung back to Labour from the Conservatives in Starmer’s general election victory in 2024, with Labour winning the seat from the Tories by 3,542 votes. 

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About 4,000 people work at the Scunthorpe plant. Retaining the Red Wall seats is one of the Labour Party’s top priorities in the face of a rising threat from Nigel Farage’s populist Reform party.

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Whether British Steel can turn a profit or not matters less if the government can make its strategic and political arguments for the rescue stack up.

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Retaining primary steel-making operations doesn’t solve the issue of Britain’s dependency on other countries for importing the raw materials required for virgin steel, including iron ore and coking coal. 

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The national security argument — that Britain needs a sovereign capability in steel to produce weapons in the event of war — only makes sense “if we’re assuming the rest of the world is going to be against us and won’t sell us steel,” Lancaster’s Kemp said. “That’s actually quite a big assumption. Personally I think it’s highly improbable.”

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The government’s justification for intervention is further complicated because it is yet to publish its long-awaited industrial strategy and strategic defense review, both of which will have a bearing on Britain’s demand for steel. The absence of those plans means that saving British Steel amounts to the government “making a punt” that it will need this manufacturing capability in future, said Andy Westwood, professor of public policy, government and business at the University of Manchester.

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“Events have overtaken them,” Westwood said, referring to Britain’s increased focus on defense since Trump’s election. “We don’t fully know what role steel is going to play, but we’re essentially making a strategic bet that it will be important.”

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—With assistance from Thomas Biesheuvel, Jack Ryan and Mark Burton.

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