How the UK Can Save British Steel With Cheaper Energy, Smarter Policy and Scrap

Cheaper Energy, More Cash and a Bit of Scrap: How to Save British Steel

With the UK government stepping in to take temporary control of British Steel, it has averted—for now—the closure of the nation’s last two blast furnaces in Scunthorpe. But the move raises a bigger question: what comes next for British steelmaking in an era that demands both profitability and decarbonisation?

Experts, union leaders, and industry insiders broadly agree that the future of British Steel—and the wider UK steel industry—depends on bold structural changes: transitioning to electric arc furnaces, reducing energy costs, embracing scrap recycling, and targeting strategic investments. The challenge now is whether policymakers will act fast—and decisively—enough.

Electric Arc Furnaces: The Inevitable Shift

At the heart of the transition is the growing consensus that electric arc furnaces (EAFs) must replace outdated and carbon-heavy blast furnaces. Unlike traditional steelmaking, which burns coal to extract iron from ore, EAFs use electricity to melt scrap steel, drastically reducing emissions.

Tata Steel’s Port Talbot facility in South Wales is already making this move, shutting down its blast furnaces in favor of electric arc systems. The Celsa plant in Cardiff provides a proven model, already producing steel with EAFs powered by high-voltage electricity.

According to Dan Marks, a research fellow at the Royal United Services Institute (RUSI), this shift is long overdue:

“This was something that needed to be done in 2019. Nobody is going to invest in blast furnaces over a 25- to 30-year commitment.”

Unions: Consider All Options, Minimize Disruption

While EAFs are likely the future, unions are cautious about potential job losses and the operational impact on Scunthorpe’s workers. Charlotte Brumpton-Childs of the GMB union suggests the government also explore low-carbon blast furnace alternatives, such as hydrogen or methane injection, to cut emissions while preserving the current workforce structure. Though technically feasible, these approaches remain expensive and less scalable in the near term.
 

Energy Prices: The Industry’s Achilles Heel

No matter the furnace type, cheaper electricity is essential. UK steelmakers currently pay £68 per megawatt hour (MWh) for power—far more than £44 in France or £52 in Germany. Swedish steel plants enjoy even lower rates thanks to abundant hydropower.

Frank Aaskov, policy director at UK Steel, argues that even minor policy tweaks could significantly level the playing field. According to the industry lobby group, matching France’s electricity prices could cost households less than 50p per year—a small price for preserving thousands of jobs and ensuring industrial competitiveness.

Liam Bates, president of long products at Sheffield-based Marcegaglia, puts it simply:

“The real ask is to have green electricity at a price similar to the rest of Europe.”

Trade Protection and Policy Urgency

Steel has long existed in a tug-of-war between free markets and protectionism, and now, with global trade disruptions and foreign dumping, UK producers are pushing for faster government action on trade enforcement.

One UK steel executive noted that tariff quotas are outdated and ill-equipped to deal with today’s market dynamics:

“We’re suffering a serious diversion of trade… prices no longer follow EU levels as has been the norm for many years.”

Government Investment: Plate Mills and DRI Plants

The Labour government has pledged £2.5 billion for the steel sector. While details are still being decided, unions and analysts have proposed two major investments:

1. A UK-Based Plate Mill

Such a facility would produce steel for wind turbine towers, a critical part of the UK’s renewable energy infrastructure. Currently, only 2% of the steel used in British offshore wind projects is sourced domestically—an economic and strategic missed opportunity.

2. A Direct Reduced Iron (DRI) Plant

DRI plants use methane—and ideally hydrogen—to produce iron from ore without coal, enabling nearly emissions-free primary steel. While India already leads in DRI production, the UK is exploring partnerships and subsidies to develop this capability at home.

Business Secretary Jonathan Reynolds confirmed the government’s interest in the technology:

“Direct reduced iron technology is of significant potential interest to us for the future.”

However, no major UK steel producers have committed to building or running a DRI facility yet. It’s likely that the government would seek an external partner to spearhead the project, based on findings from the Materials Processing Institute.

Scrap Metal: The Unsung Hero

One of the most practical—and underutilized—resources in UK steel is scrap metal. The UK generates 10–11 million tonnes of scrap annually, yet exports most of it, primarily to Turkey.

In 2023, the UK produced just 5.6 million tonnes of steel, meaning domestic scrap alone could easily supply the entire industry’s raw material needs.

Dan Marks argues that policy should shift toward securing domestic scrap supplies instead of clinging to the idea of traditional virgin steelmaking:

“Worrying about whether your steel is recycled or not is pointless. The question is: is your supply secure?”

What Comes Next?

British Steel’s future now rests on bold decisions, not emergency rescues. The technologies exist. The investments are being pledged. What’s needed now is a coherent industrial strategy that connects climate goals, energy policy, and national economic priorities.

If successful, the UK could create a leaner, greener, and more resilient steel industry—one capable of competing internationally while preserving good jobs at home.

Stay tuned to The Horizons Times for ongoing coverage of the UK steel industry, green energy transitions, and the future of British manufacturing.