Saturday’s emergency legislation demonstrates that this Labour Government is prepared to act decisively when it comes to protecting sovereign industrial capabilities. There are critics both inside and outside Whitehall who have argued that this will undermine the confidence of foreign investors looking at the UK as a potential market but Ministers have decided that this is a risk worth taking. They are also aware of the legal, political and financial, precedents they are establishing.
Protection of private property is enshrined in various national and international human rights legislation but as with many such rights it comes with responsibilities. In this case the Government has assumed powers to determine whether or not the private property of Jingye (which owns British Steel) is being used “in the public interest”. Claiming that Jingye’s property rights have a higher priority than the public interest seems an unlikely argument but no doubt both their lawyers and those of the Chinese Government are considering this as well as other legal claims.
The political precedent it sets is perhaps more consequential. The very strong Ministerial criticism of Jingye will have been noticed by other foreign and domestic owners of key UK companies. The Chancellor recently wrote that
“we need a strong, smart and agile state to support key industries”
This will strengthen the case for more clarity about how this can be done. Questions such which are the key industries she wants to support, how to do this without excessive cost to the taxpayer and what are the lessons we can learn from how our European and NATO allies support their key industries need at least some answers. In his BBC interview on Sunday the Business Secretary said that
“if Germany, and Holland, and Sweden can have a steel industry so can we”
and then went on to point that about 40% of demand for steel in the UK comes from UK suppliers. Across Europe that figure is 80%. So keen policy advisers will be looking very closely at how our European friends have kept their steel industries going.
A more complex and challenging question is what assets within the “key industries” (as mentioned by the Chancellor) may need safeguarding. As well as physical equipment does the Government need to identify key skills that should be kept within the UK? After all the UK’s ability to generate advances in sectors such as AI, biotechnology, and quantum computing is critically dependent on educating, training and retaining the right people as well as having the right physical equipment and software.
The good news is that the financial precedent set by this new legislation is limited. If nationalisation is the eventual outcome the Government would pay Jingye the current market value. In his Commons statement the Business Secretary said that the market value of British Steel “is effectively zero”, so that must have been a relief to the Chancellor and other Ministers. What is less welcome is that the Scunthorpe needs substantial investment to continue as a viable undertaking. Where that investment will come from is uncertain at the moment, but there is of course the potential for using frozen Russian State Bank assets to help fund UK exports to Ukraine. This could release funds to support the UK steel industry.
The Business Secretary repeatedly said that he didn’t want to retain the powers the legislation gives him, and that it was a unique situation. Nevertheless, it is a concrete recognition by the Government that the old policies of free and unimpeded movement of capital and exposing UK industry to the most robust forms of global competition need to be significantly adapted. In the coming months we will see what those adaptions will deliver.
Enjoyed this piece? Click here to read Josh’s previous piece for the PB blog!
