Plans to nationalise British Steel welcome but could bring cost pressure for construction

The government’s intention to bring British Steel under public ownership is welcome in supporting a strategically important industry, but it may increase cost pressures for the construction sector, BCIS has cautioned.

Responding to the plans, BCIS chief economist Dr David Crosthwaite said UK steelmakers continue to face some of the highest electricity prices in Europe, with payments under the government’s proposed 90% electricity cost compensation scheme not expected to begin until at least April 2027.

He added that, alongside stricter tariffs on imported steel, this could limit access to affordable steel in the near term and push up costs for contractors relying on domestic supply.

‘Nationalising British Steel may help to secure the UK’s long-term steelmaking capacity, but for the wider construction sector and contractors specifically, the immediate concern is the potential impact on material costs and already stretched project margins,’ he said.

‘During a period of weak demand and muted investment appetite, any increase in steel prices caused by protectionist measures or supply constraints could place additional financial pressure on firms across the construction supply chain.’

On Monday, the government confirmed plans to introduce legislation enabling it to take ownership of British Steel from its current owner, Jingye Steel.

The move follows the government’s intervention at British Steel’s Scunthorpe steelworks in April last year to prevent the closure of its blast furnaces.

The government will only be able to seize control of British Steel if it passes a public interest test considering factors such as national security, maintaining critical national infrastructure and supporting the economy.

In March, the National Audit Office revealed that the Department for Business and Trade spent £377 million between April 2025 and January 2026 to keep the Scunthorpe site operational⁽¹⁾.

Dr Crosthwaite noted that nationalising British Steel could create uncertainty among prospective private investors by reinforcing perceptions that, while investment in the UK is welcome, government intervention may ultimately override private ownership when assets become strategically sensitive.

He added that government support for the domestic steel industry will ultimately require a delicate balancing act.

‘In the near term, while energy markets and global trade conditions remain unpredictable, maintaining a competitive and secure UK steel industry is likely to require significant government support. It is crucial this intervention succeeds. Failure would risk undermining both domestic steel production and the wider construction sector,’ he said.

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^{(1) National Audit Office – Government spends £377 million in 9 months to keep British Steel’s Scunthorpe site operating – here}