ONS set to weigh up cost to public purse of British Steel rescue
The UK’s official statistics body has begun an assessment of the cost of running British Steel since the loss-making business was rescued by the government, City PM can reveal, in what could prove to be another blow to Chancellor Rachel Reeves’ fiscal targets.
The UK’s top statistician Professor Sir Ian Diamond said the Office for National Statistics was considering whether British Steel, which was on the verge of collapsing earlier this month, should be classified as a public body after the Labour government stepped in to take control of the plant at Scunthorpe.
A provisional ONS estimate from this month showed that the government borrowed £14.6bn more in the year to March than the Office for Budget Responsibility (OBR), the fiscal watchdog, had pencilled in, reducing Chancellor Rachel Reeves’ chances of maintaining her small £9.9bn headroom without raising taxes or cutting spending.
In a letter seen by City PM, Diamond said cost estimates would be provided for the running of British Steel towards the end of May.
“The ONS has begun an assessment of the sector classification status of British Steel Limited,” Diamond wrote.
“HM Treasury is responsible for advising on the administrative or policy implications that may arise from a classification decision.
“We intend to classify British Steel Limited and publish the outcome of this decision in our Public Sector Classification Guide and accompanying article, which will also provide estimates of the impact on the relevant fiscal measures, on 22 May 2025.”
The revelation came in response to shadow business secretary Andrew Griffith’s call for the ONS to make an assessment of the takeover, as he suggested it would have a “significant impact” on public finances.
Griffith said Reeves had already set herself “too little headroom” at last month’s Spring Statement.
“She’s overshot the latest borrowing figures and the UK economy continues to weaken,” he told City PM.
“The taxpayer is clearly shouldering the costs of Scunthorpe, yet so far Labour have refused to provide a single figure for these costs.
“It is only right that the public accounts now properly reflect their choices with integrity.”
The government passed legislation to take control of the plant in an emergency vote held on a Saturday in mid-April.
City PM understands that the government does not envisage further borrowing to support its intervention.
British Steel made losses of £231m
The steel plant received raw materials including iron ore needed to keep the plant going last week, while business secretary Jonathan Reynolds has suggested that nationalisation remained an option.
But the costs of running Scunthorpe are high due to soaring energy prices and expensive supplies.
Chinese multinational company Jingye, which owned the plant, said in March that it was making losses of around £700,000 a day as it said the blast furnaces were not “financially sustainable”.
British Steel made a pre-tax loss of £231m in 2023, its most recent accounts show.
Public finances are already in shaky territory. A forthcoming spending review and the rolling out of the government’s industrial strategy could help to ease some of the tensions but leading economists at the Institute for Fiscal Studies and EY believe Reeves will have to raise taxes in the autumn in order to restore her fiscal buffer.
The takeover of British Steel is likely to add extra strains to the public purse.
Opposition parties did not vote against Labour’s emergency legislation. Reform UK previously called for full nationalisation to be introduced.
Labour said in its manifesto it would commit £2.5bn investment to the UK steel industry, which is seen as critical to ambitions to boost defence.
A spokesperson for the Department for Business and Trade said: “The Chancellor and Prime Minister have made clear the UK’s fiscal rules remain non-negotiables and that funding required for the Scunthorpe site will come out of existing budgets.”