China Warns UK Over British Steel Takeover as Beijing Demands Compensation

China has demanded compensation after the UK government brought British Steel into public ownership, arguing the move breached protections for foreign investors under a bilateral investment treaty between the two countries.

Jingye Group, the Chinese company that acquired British Steel in 2020, said the government had offered 'almost zero compensation' despite its investment in the business. China's Ministry of Commerce said the decision had seriously undermined confidence among Chinese companies investing in Britain and warned Beijing would take 'appropriate measures' to protect their interests.

The dispute centres on British Steel's Scunthorpe works in North Lincolnshire, home to the UK's last remaining blast furnaces capable of producing virgin steel from raw materials. Ministers said bringing the company into public ownership would protect around 2,700 jobs, preserve domestic steelmaking capacity and safeguard supplies for defence and major infrastructure projects.

China Challenges UK's Compensation Plan

In a statement released on Sunday, Jingye urged the British government to stop what it described as 'trampling on international investment rules' and to provide full compensation for losses linked to the takeover.

China's Ministry of Commerce criticised the government's decision, saying the company had been taken into public ownership under the banner of national security and warning the move could undermine confidence among Chinese businesses investing in Britain.

The company said the UK had failed to recognise its investment in British Steel since acquiring the business in 2020. It also said government support for the business had reached £377 million ($507 million) by the end of January and estimated the figure had exceeded £600 million ($807 million) by the end of June, with costs potentially rising above £1.5 billion ($2 billion) by 2028.

The Ministry of Foreign Affairs also pointed to the China-UK Bilateral Investment Treaty, signed in 1986. The treaty protects foreign investors from arbitrary expropriation without compensation, forming the basis of Jingye's demand.

Government Defends State Intervention

The government said it had held negotiations with Jingye but was unable to reach an agreement that represented value for taxpayers. Business Secretary Peter Kyle said public ownership would allow ministers to stabilise British Steel while supporting communities that depend on the business and developing a competitive, lower-carbon steel industry.

The Scunthorpe site is the UK's only remaining producer of virgin steel from iron ore, with most other domestic steelmakers now relying on electric arc furnaces that recycle scrap metal. If production ceased before alternative capacity became available, Britain would become the only G7 country without the ability to manufacture virgin steel domestically.

The National Audit Office estimated earlier this year that operating the Scunthorpe works was costing the government about £1.3 million ($1.7 million) a day, highlighting the financial challenge facing ministers as they decide the company's long-term future.

Independent Valuation to Determine Compensation

Small Business Minister Blair McDougall told the House of Commons that the government would appoint an independent valuer in the autumn to determine what compensation, if any, should be paid to Jingye.

He said the assessment would establish the company's value under the legislation and could conclude that no compensation was payable.

The government has maintained that intervention was necessary after negotiations with Jingye failed to produce an agreement it considered represented value for taxpayers. The independent valuation will determine whether Jingye receives any compensation for its investment following the move to bring British Steel into public ownership.