British Steel: selling the family silver

Why do we keep selling what Harold Macmillan called “the family silver”? And why, when things don’t work or are about to go bust, do we expect the government to rescue our strategic industries, such as steel, burdened with crippling levels of debt partly incurred to line the pockets of wealthy foreign investors?

Here’s another question: how come we’ve only just woken up to the fact that China may not always have our best interests at heart? When he was Prime Minister, David Cameron extolled the virtues of a new “golden era” in UK-China ties. This led, among others, to China taking a stake in Britain’s nuclear reactors, North Sea gas, offshore wind and power network. It doesn’t get more strategic than that.

Chinese commercial companies may or may not be run independently. But they are first and foremost answerable to the Chinese state and the sole, ruling Communist Party. You can’t sugarcoat that simple fact. Did Cameron suffer a rush of blood to the head? The Intelligence and Security Committee was clear: tread carefully. But Cameron and Osborne went in with both feet.

Now we discover that British Steel’s Chinese owner, Jingye Group, was covertly preparing to shut down its blast furnaces, a virtually irreversible move that would have devastated the town of Scunthorpe. You can’t just shut down a blast furnace. It has to be kept going which is why the government stepped in.

The explanation that, having failed to make a go of it, the Chinese were happy to let Scunthorpe founder because Britain would then have been forced to buy cheap imported Chinese steel, seems plausible. What did we expect? A hug and a mug of cocoa?

The world turns. Countries can’t stand still as Walter Ellis points out in an excellent essay. Industries rise and fall. Once the world was made in Britain. Now it’s made in China. Economies boom and then they bust. This is not an argument for perpetually supporting lame ducks. But it is an argument for being clear-sighted at what constitutes the national interest.

When Margaret Thatcher launched her privatisation revolution she had three things in mind: usher in an age of popular shareholding, fill the state’s coffers and unleash the spirit of entrepreneurship. It’s been claimed that she also wanted to encourage home-grown innovation. I’m not sure she did. She was an internationalist. In any case, it hasn’t.

Over the past few decades the UK has sold off or allowed foreign control of key strategic industries at an accelerating pace. In 2023, for example, over 90% of deals in the UK’s tech sector over £50 million involved foreign investors. More than 70% of the UK’s scandalously negligent water and sewage plants are in foreign ownership. Many of Britain’s other public utilities (services used by the public) are foreign-owned: EON, Scottish Power, EDF and so on.

Utilities are money for old rope. They’re almost always monopolies and they have a captive market. All so-called competitors offer different deals but on the same infrastructure network: power, communication, water.

We’re about to sell Royal Mail to a Czech businessman. It’s no longer the only postal provider, but it remains vital to everyday life across Britain. Its privatisation in 2013 marked the end of more than a century of public ownership. The UK is only one of three countries to have fully privatised its postal service. The other two are Germany and the Netherlands.

We shouldn’t become sentimental about these legacy industries. Privatisation has fostered competition. Voters have seen (some) benefits. Modernisation requires huge investments which often only the private sector or foreign governments can supply. China’s foreign exchange reserves in March totalled $3.24 trillion.

But the long-term consequences of relinquishing control of key sectors with a nationwide reach are, as we have seen, unpredictable. Selling our nuclear power stations, cold steel industries, tech sector companies with a life-and-death grip on pretty much anything that keeps us alive – can’t be treated as a giant game of monopoly.

In an emergency — the pandemic for example — a national postal network is not just a vital service. It’s a walking, talking expression – however wanting — of national togetherness, like the NHS. Energy, as Russia’s invasion of Ukraine has shown, is crucial to our national security, public welfare and sovereignty.

Germany has bitterly regretted its past reliance on Russian gas through projects like Nord Stream 1 and 2. Economic interdependence no longer guarantees security. This realisation has been doubly reinforced by Donald Trump aggressive on-off isolationism in the White House.

Data security, reliable supply lines and political resilience in stormy weather is no longer a choice. It’s a necessity. Not everybody’s a good guy. And as the US has shown nobody’s a good guy all of the time.

Britain once led the world in industrial innovation and public infrastructure. Keir Starmer’s attempt at triangulation between America and Europe is a mistake of the first order. The cardinal, indeed the only, iron law in the 21^st century is national resilience.

We need to learn from the past as well as gaze into the future. Some sectors are simply too important to leave entirely to the market or to foreign control. Strategic industries should serve the national interest, full stop.

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