Taxpayer support for Sheffield Forgemasters hits £400m just 3.5 years after nationalisation

British taxpayers have injected more than £400 million into Sheffield Forgemasters, the historic steelmaker and defence contractor, just three and a half years after the company was brought into public ownership — burning through a decade’s worth of planned investment in record time. Read more: Taxpayer support for Sheffield Forgemasters hits £400m just 3.5 years after nationalisation

May 27, 2025 - 10:01

Taxpayer support for Sheffield Forgemasters hits £400m just 3.5 years after nationalisation

unions seek £200m from ministers to safeguard scunthorpe steelworks as blast furnaces face closure Unions are calling on the UK government to inject £200 million into British Steel, in a last-ditch attempt to keep its two blast furnaces in Scunthorpe running until electric arc replacements can be brought online. The trade union Community warns that without additional support, the rapid shutdown of Scunthorpe’s coal-fuelled blast furnaces could spark nearly 2,000 immediate job losses. the push for a ‘just transition’ British Steel, owned by Chinese group Jingye, is already committed to installing cleaner electric arc furnaces (EAFs) in Scunthorpe. However, union leaders fear that the abrupt closure of blast furnaces, without an interim plan, will devastate Lincolnshire’s local economy and eliminate key steelmaking capabilities prematurely. Roy Rickhuss, Community’s general secretary, described the plan as a “roadmap towards a just transition” and a way to avoid a “destructive cliff-edge” in job cuts. He believes government intervention to cover an extra £200 million in carbon costs, which are levied on large polluters, could keep both blast furnaces running and maintain income streams until EAFs are operational. Syndex, the consultancy commissioned by Community, backs the union’s case. It argues that government support to fund the short-term costs of carbon is the only way to make operating both furnaces “financially viable.” Maintaining just one furnace or closing them both would prove too costly, Syndex warns, especially considering the high fixed costs and potential loss of critical raw material access. uncertainty around government support The request follows a separate move by the government to provide around £500 million to India’s Tata Steel for upgrading the Port Talbot plant in Wales, a deal that included the closure of its blast furnaces there, costing 2,500 jobs. Ministers have pledged up to £2.5 billion in further support to help decarbonise the UK steel industry, but details remain vague, and it is unclear how much might go to British Steel. Business Secretary Jonathan Reynolds has signalled a desire to “champion decarbonisation without deindustrialisation,” launching a consultation on the UK’s steel strategy. Yet a cocktail of global forces—such as a steel glut fuelled by China’s construction downturn and the 25% US tariffs on steel imports—threatens to depress prices further, complicating British Steel’s switch to greener operations. electric arc furnaces: a mixed blessing While EAFs produce significantly less carbon dioxide compared to traditional blast furnaces, they require extra facilities to convert iron ore for steelmaking. Such infrastructure is not yet established in the UK at the necessary scale, fuelling fears—particularly among some politicians and defence officials—that the country could lose a core manufacturing skillset if Scunthorpe’s blast furnaces are mothballed. Despite these concerns, the Trades Union Congress (TUC) says moving quickly to modern, cleaner technology is “vital” if UK steel is to remain globally competitive. “It’s essential we continue to produce steel in Britain, and decarbonising is the only way we can do that in the long term,” insists TUC general secretary Paul Nowak. the road ahead For now, British Steel acknowledges that government talks are ongoing, emphasising that its “trade union partners will be an important part of that future.” The question remains whether ministers will agree to pump in a further £200 million, with Community and Syndex arguing it is the only strategy that will save Scunthorpe from large-scale redundancies and maintain a fully functioning domestic steel industry until greener technology is ready to take over. SERP-friendly meta description Unions urge the UK government to provide British Steel with £200m to keep Scunthorpe’s two blast furnaces running until electric arc furnaces can be built. Discover why nearly 2,000 jobs are at stake, and why steel’s transition to cleaner technology hangs in the balance.

British taxpayers have injected more than £400 million into Sheffield Forgemasters, the historic steelmaker and defence contractor, just three and a half years after the company was brought into public ownership — burning through a decade’s worth of planned investment in record time.

The Ministry of Defence confirmed this weekend that a total of £403 million in state aid has now been funnelled into the lossmaking company since Boris Johnson’s government nationalised it in August 2021. The sum was originally intended to be spread over ten years to 2031, but has been fully allocated in little more than a third of that time — averaging £300,000 a day, or £169,000 a year for each of the company’s 640 employees.

Despite the mounting costs, the MoD has staunchly defended the investment, calling Forgemasters a “shining light of UK industry” and pointing to the firm’s critical role in national defence, particularly in supporting the UK and Australia’s SSN-AUKUS nuclear submarine programme.

Forgemasters, based in Sheffield, produces high-grade cast steel components used in nuclear-powered submarines, including parts for nuclear-grade defence systems that no other UK company can supply. The firm was acquired by the government in 2021 after a long period of financial turmoil and a failed attempt by a Chinese state-owned firm to purchase it in 2015 — a deal ultimately blocked over national security concerns.

At the time of nationalisation, Johnson’s government argued the buyout was “the best value for money for the taxpayer due to the unique capabilities and circumstances” of the firm.

However, Forgemasters has continued to operate at a loss, posting pre-tax losses of £4 million to £5 million annually since entering public ownership. Revenues have remained flat, and the company has not returned to profitability despite the heavy government backing.

The level of state aid has surged under the new Labour administration, with £160 million invested since July 2024 alone.

Forgemasters traces its origins back to the 1750s, but the company’s modern incarnation emerged during the Thatcher era, when it was spun out of British Steel during privatisation. It has been no stranger to controversy. In 1990, it was embroiled in the so-called “supergun affair”, linked to weapons exports to Iraq. In the 2000s, it supplied rolled steel to Russian metals giant Severstal, owned by sanctioned oligarch Alexei Mordashov.

After years of decline, the company narrowly avoided bankruptcy in 2020, after a £30 million loan from Wells Fargo nearly brought the business to collapse. The government stepped in the following year with a full nationalisation package.

The MoD insists that the government’s financial support is about safeguarding vital sovereign defence capability — especially amid rising geopolitical tensions and the development of the SSN-AUKUS submarine fleet, described as the most powerful attack submarines ever operated by the Royal Navy.

“The company manufactures specialist steel parts used in critical defence programmes,” the MoD said in a statement. “This government will support Sheffield Forgemasters to improve its capacity to meet defence needs and continue to review company performance.”

Nonetheless, the extraordinary burn rate of taxpayer funds — well ahead of schedule — raises questions over the government’s oversight, financial strategy, and long-term plan for one of Britain’s most strategically important, yet financially troubled, industrial firms.

While few question the importance of Forgemasters’ work for national defence, the mounting costs will likely fuel debate over how — and how much — the taxpayer should be expected to subsidise Britain’s industrial base in the name of strategic resilience.