EU plunges British steel industry into the biggest crisis in its history

What is the background to the current crisis in the British steel industry?

The British steel industry faces what is likely the greatest challenge in its history in autumn 2025. On October 7, 2025, the European Commission announced far-reaching safeguard measures for the European steel sector that will have a massive impact on the United Kingdom's steel industry. The EU Commission proposes to reduce duty-free steel import quotas by 47 percent from the planned 2024 volumes to 18.3 million tonnes per year. At the same time, the tariff rate for steel volumes exceeding this quota is to be doubled from 25 percent to 50 percent. These measures aim to protect the European steel industry from the unfair effects of global overcapacity, particularly from cheap steel from China, which could increasingly be diverted to Europe following the imposition of high US tariffs.

The core of the problem: new EU rules and Britain's export dependence

These planned measures pose an existential threat to the British steel industry. Approximately 78 to 80 percent of British steel exports go to the European Union, equivalent to a value of around three billion British pounds. Of the approximately four million tons of steel produced annually in Great Britain, approximately 1.9 million tons are exported to the EU. The EU is thus by far the most important sales market for British steel. The British steel industry's dependence on this export market makes it particularly vulnerable to EU trade protection measures.

Industry representatives warn of an impending catastrophe

The reactions from the British steel industry are unanimously alarming. Gareth Stace, Director General of the trade association UK Steel, described the situation as potentially the biggest crisis the British steel industry has ever experienced. He called on the British government to fully exploit its trade relations with the European Union to secure country-specific quotas for the United Kingdom, or else catastrophe awaits. Stace also warned of a second serious risk: EU measures could result in millions of tons of steel that can no longer be exported to Europe due to European tariffs being diverted to the British market instead. This could spell the final death knell for many of the remaining British steel companies.

The Community trade union, which represents many British steelworkers, describes the planned EU measures as an existential threat to the steel industry. Alasdair McDiarmid, the union's assistant general secretary, stressed that Europe is by far the largest destination for British steel exports and that losing access to this market would have a catastrophic impact on British jobs. He appealed to governments in both the UK and the EU to enter into urgent negotiations to mitigate the severe impact of these proposals on the steel industry. McDiarmid warned that a trade war with the EU, at a time when the global steel industry is already under enormous pressure, would be devastating for all parties involved, with workers in both the UK and Europe bearing the brunt.

A sector in free fall: production figures at historic lows

The British steel industry has been undergoing a difficult transformation process for years. In 2024, crude steel production in the United Kingdom fell by a dramatic 29 percent to just four million tonnes. This was the third consecutive decline and marked a historic low. By comparison, British crude steel production has fallen by three-quarters since 2000. The United Kingdom slipped from 26th place among global steel producers in 2023 to 36th place in 2024, now ranking between Sweden and Slovakia. The country's importance for global steel production has thus further declined.

The drastic drop in production in 2024 is primarily due to the closure of the blast furnaces at Port Talbot. The Port Talbot steelworks, the largest in the United Kingdom, shut down its first blast furnace in July 2024, followed by the second and final blast furnaces in September 2024. These closures ended over 100 years of primary steelmaking in the town. The blast furnaces will be replaced by an electric arc furnace, expected to come online by the end of 2027. This switch is part of the steel industry's green transformation and is expected to reduce CO2 emissions at the site by 90 percent. The Indian owner, Tata Steel, is investing £750 million in the construction of the new electric arc furnace, while the UK government is contributing £500 million.

The high price of modernization: thousands of jobs lost

The transition to more climate-friendly production methods has serious social consequences. Tata Steel announced in January 2024 that it would cut 2,800 jobs, with 2,500 of these positions to be eliminated within 18 months. Most of these job losses will be in Port Talbot, with a further 300 potential losses in Llanwern, Newport, within three years. Before the blast furnaces closed, over 4,000 people worked at the Port Talbot steelworks. Following the closure in October 2024, approximately 2,000 employees remained, primarily involved in processing imported steel plates to produce rolled steel products.

The Community trade union described Tata Steel's plans as devastating for Port Talbot and the entire steel industry. The job losses will not only have a direct impact on steelworks workers, but also on the entire supply chain and the local economy. Academic studies by the University of Leeds into previous mass redundancies in the Welsh steel industry in the early 2000s showed that affected steelworkers faced significant structural barriers in transitioning to new employment and that the redundancies also had negative impacts in areas such as health and housing. Dr. Calvin Jones estimates that the job losses in Port Talbot could result in the town losing around £200 million in annual income, equivalent to almost 15 percent of the town's total gross income.

London's diplomatic tactics in the steel crisis

The British government under Prime Minister Keir Starmer has signaled strong support for the steel industry, but faces the difficult task of mediating between diverse interests. During his flight to India for a trade mission in October 2025, Starmer announced that his government was in talks with the EU about the proposed steel tariffs. However, he avoided providing details or confirming whether the UK would seek an exemption from the new rules. Starmer emphasized only that the government is in discussions with both the EU and the US about steel tariffs and will have more to say in due course.

Trade Secretary Chris McDonald called on the European Commission to urgently clarify the impact of this measure on the United Kingdom. He stressed that it was crucial to protect the flow of goods between the UK and the EU and that the government would work with its closest allies to address global challenges rather than exacerbate the concerns of industries. The UK government also announced that it would continue to explore stronger trade measures to protect British steel producers from unfair practices.

The logic behind the EU protective measures

The European Union justifies its safeguard measures with the need to protect the European steel industry from the unfair effects of global overcapacity. EU Commission President Ursula von der Leyen emphasized that a strong, decarbonized steel sector is crucial for the competitiveness, economic security, and strategic autonomy of the European Union. Global overcapacity is damaging the industry, and action must be taken now. She called on the Council and Parliament to act swiftly.

The Commission cites global overcapacity of well over 600 million tonnes, which is more than five times the EU's annual steel consumption. This overcapacity, the increase in steel imports, and the closure of third-country markets are weakening the sector's competitiveness, hindering investments in decarbonization, and jeopardizing long-term viability. The EU accuses China, in particular, of using state aid to give its steel industry an unfair advantage and ensuring that there is too much steel on the global market.

China's steel glut floods the world market

China is by far the world's largest steel producer. According to figures from the World Steel Association, China produced over one billion tons of steel in 2024, accounting for more than half of global steel production. By comparison, German industry produced around 37 million tons of steel in the same year. China's enormous overcapacity is the result of a combination of weak domestic demand, particularly due to the ongoing real estate crisis, and state-subsidized production. This overcapacity has led to China massively increasing its steel exports.

Chinese steel exports surged in 2024, reaching 50 percent above the five-year average and 19 percent higher than the same period last year. With 95 million tons of steel exported in 2024, China reached its highest level since 2015-2016. Thanks to economies of scale, lower input costs, and excess capacity, Chinese steel prices are significantly lower than those of international competitors. In many countries, the influx of cheap Chinese steel imports threatens domestic steel producers, who struggle to compete with the much cheaper imports.

Global defensive measures against cheap imports

The dynamics of Chinese steel exports have prompted many countries to take protective measures in the form of tariff increases or anti-dumping duties. In early 2025, Latin American countries such as Mexico, Chile, and Brazil began raising tariffs on Chinese steel. This move was soon followed by the United States and the European Union. Recently, key Asian trading partners of China, including India and Thailand, have also joined this wave of protectionism. This could put economic relations to the test, as China is a major buyer and investor in many countries in Latin America and Asia.

The United States under President Donald Trump has taken particularly aggressive measures. On March 12, 2025, the additional tariffs on steel and aluminum products, originally introduced in 2018, were reactivated after being partially suspended under the Biden administration. The tariff rate was initially set at 25 percent. On June 4, 2025, Trump increased the tariffs on steel and aluminum imports to 50 percent for all countries except Great Britain. These measures are intended to strengthen the American steel industry and protect national security interests. About a quarter of the steel used in the United States is imported, the majority of it from neighboring countries Mexico and Canada or close allies in Asia and Europe.

Caught between US tariffs and EU barriers

The British steel industry faces an unprecedented double burden. On the one hand, British steel exports to the US have been subject to a 25 percent tariff since March 2025, following Trump's reintroduction of steel tariffs. While the UK received some preferential treatment under an economic prosperity agreement with the US on May 8, 2025, and continues to pay a 25 percent tariff, while other countries have had to pay 50 percent since June 2025, these tariffs nevertheless represent a significant burden. The US is the second most important export market for British steel, with approximately 200,000 tonnes exported there annually, equivalent to nine percent by value and seven percent by volume.

On the other hand, the EU now threatens to drastically increase the price of, or even completely cut off, British steel's most important export market with its planned 50 percent tariffs. British steel exporters described the situation to the media as a double blow. One exporter stated that the new EU rules would have a direct impact on British exports and lead to negative trade diversion. Lisa Coulson, commercial director of British Steel, expressed particular concern about reports of the EU's planned cuts to steel import quotas. This could result in British manufacturers being excluded from their largest export market while continuing to face a 25 percent tariff in the US.

High energy costs as a self-made competitive disadvantage

In addition to trade policy challenges, the British steel industry is struggling with significant structural competitive disadvantages. A particularly serious problem is the extremely high cost of energy. New data from UK Steel from September 2025 shows that British steel producers are expected to pay up to 25 percent more for electricity in 2025 and 2026 than their competitors in France and Germany. This results in additional costs of £26 million per year. UK Steel estimated the additional costs for British steel producers due to higher electricity prices compared to EU competitors at £117 million annually.

High energy costs are particularly problematic as the steel industry increasingly switches to electric arc furnaces, which have significantly higher power requirements than traditional blast furnaces. Electricity is a fundamental input for steel production, and competitive electricity prices will become increasingly important to the industry's competitiveness, long-term success, and long-term survival as it transitions to electrification. Gareth Stace of UK Steel emphasized that the UK steel industry has one hand tied behind its back, facing electricity prices up to 25 percent higher than those of its European competitors. These uncompetitive electricity prices pose a threat to jobs, future investment, and net-zero ambitions.

Dependence on imports due to limited product diversity

The UK steel market is heavily dependent on steel imports. In 2023, production amounted to 5.6 million tonnes, while consumption was 7.6 million tonnes. However, UK steel producers only partially met this demand, selling 3.04 million tonnes on the domestic market. The remaining 4.46 million tonnes were sourced from foreign suppliers. In 2023, import penetration was 60 percent, down from 55 percent in the previous year.

Importers were able to secure such a large slice of the pie not only because a significant portion of local steel products was exported, but primarily due to the limited product range of British steel mills. One example is Category 2 cold-rolled flat steel, used in the manufacture of automotive parts and household appliances. It is produced in the United Kingdom only at one of Tata Steel's mills, and there in very limited quantities. The company's management therefore decided to discontinue commercial sales and use the entire product for further galvanizing production.

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Weakening demand from the automotive and construction sectors

Demand for steel in the UK is primarily driven by the automotive and construction industries, both of which have faced challenges in recent years. UK car production declined by 13.9 percent to 779,584 units in 2024, with an eight percent decline in the domestic market to 176,019 units. Total vehicle production fell by 11.8 percent to 905,233 units over the same period. Electric vehicle production even declined by 20.4 percent to 275,896 units. The automotive sector is undergoing a difficult transition to electric vehicles, which is impacting demand for steel.

The construction sector also faced challenging times, due to rising costs and a decline in investment and demand amid challenging economic conditions. Construction output fell sharply at the end of 2023, but in the second half of 2024, according to the Office for National Statistics, a slow recovery was recorded in most sectors, with the exception of public housing and commercial work. However, the industry recorded a high number of insolvencies, totaling 4,102 in the 12 months to November 2024, albeit 6.3 percent lower than in the previous 12 months.

Historical Review: The Foundation of British Industry

The steel industry has a long and distinguished history in Great Britain. The country was the birthplace of the Industrial Revolution between 1760 and 1840, which brought innovative mechanization and profound social change. This process saw the invention of steam-powered machinery, which was used in the factories of the ever-expanding urban centers. The British steel industry played a central role in the country's industrialization and contributed significantly to its economic power and global influence.

In the interwar period of the 20th century, the sympathies of British steel industrialists undoubtedly lay with the Conservative-led government. They pushed the government toward a protective tariff policy against foreign competition and supported the Ottawa Policy, the creation of a closed economic area within the British Empire. The British steel industry's accession to the International Crude Steel Exporting Community in 1935 underscored the remarkable influence the British iron and steel industry had on the government.

Post-war development: From nationalization to global takeovers

During World War II, the state controlled steel production, and it continued to do so afterward. In 1967, the government consolidated 90 percent of production—14 companies with 268,500 employees—under the umbrella of British Steel. British Steel closed outdated, small steelworks and concentrated production at five locations. This restructuring met with fierce resistance. The workers resisted in a 13-week strike in 1980, ultimately unsuccessfully. Margaret Thatcher, in office since 1979, focused on privatization.

By the end of the 1980s, the company was profitable again, and its workforce had shrunk by less than half. In 1988, the Thatcher government privatized British Steel. In 1999, British Steel and the Dutch company Hoogovens merged to form Corus. Three years and three CEOs later, the company was on the brink of collapse. Under the leadership of Philippe Varin, Corus recovered through further job cuts. In February 2007, it was announced that the Indian Tata Group would acquire Corus. At that time, Corus employed 24,000 people at four locations in Great Britain.

Brexit as an additional crisis catalyst

Brexit has further complicated the situation for the British steel industry. Even after Brexit, Great Britain remains an open economy that is heavily dependent on foreign trade. In 2024, exports of goods and services accounted for around one-third of its gross domestic product. The EU, accounting for 48 percent of all British exports, is a significantly larger sales market than the US, which accounts for 16 percent. Britain's hopes of a large Brexit dividend from leaving the European Union have not been fulfilled. The country has neither gained significant financial flexibility nor succeeded in even remotely offsetting the trade policy disadvantages resulting from Brexit through new trade agreements with third countries.

In 2021, the first year in which the single market rules were replaced by the provisions of the Trade and Cooperation Agreement, the adverse effects on the exchange of goods between the two economic areas became clear. British imports from the EU suffered particularly badly. The Northern Ireland Protocol has only partially fulfilled the hopes placed in it. Border controls in the Irish Sea have led to political tensions. Trade diversion effects between Great Britain and Northern Ireland are also evident.

The concrete consequences: How the EU plans restrict market access

The proposed 47 percent reduction in duty-free steel import quotas means that significantly less steel can be imported into the EU without incurring tariffs. For British steelmakers, this could severely restrict or even completely cut off access to their most important export market. If British steel shipments exceed the new, significantly lower quotas, a 50 percent tariff would apply, making British steel products virtually uncompetitive in the European market. Emily Sawicz, director and senior industrials analyst at RSM UK, described the EU announcement as a significant threat to the British steel industry. The EU accounts for around 80 percent of British steel exports, so these tariffs risk cutting off access to the UK's largest and most strategically important market, at a time when the sector is already under enormous pressure from global competition and rising energy costs.

The proposed measure would replace the steel safeguard measure, which expires in June 2026. It responds to the calls of workers, industry, several Member States, Members of the European Parliament, and EU stakeholders to provide strong and lasting protection for the EU steel industry to preserve jobs in the EU and support the sector in its decarbonization efforts. However, for the UK steel industry, this poses an existential threat to its export opportunities.

Hope for exceptions and special regulations

The European Commission has announced that, due to their close integration into the EU internal market under the European Economic Area Agreement, no tariff quotas or customs duties will apply to exports from Norway, Iceland, and Liechtenstein. These countries are part of the EEA and are therefore subject to different rules than third countries. The Commission has also signaled its willingness to exempt Ukraine from tariffs, arguing that the interests of a candidate country facing an urgent and immediate security situation should be taken into account when allocating quotas, without compromising the effectiveness of the measure.

For the UK, which is neither part of the EEA nor has candidate country status in a security crisis, there is currently no clear exemption. However, the EU Ambassador to the UK, Pedro Serrano, stated that negotiations will take place with countries like the UK that have a trade agreement with the EU to consider a country-specific allocation of the duty-free quota. He confirmed that contacts have already taken place at an official level between Whitehall and Brussels and will continue. The UK government hopes that these negotiations will lead to a more favorable solution for the domestic steel industry.

The government's strategy: negotiations and its own protective walls

The UK government is attempting to negotiate on multiple levels to mitigate the impact of both the US and European steel tariffs. Prime Minister Keir Starmer has repeatedly stressed that the UK is in talks with both the EU and the US about the steel tariffs. However, the government is avoiding making public details about its specific demands or negotiating positions. This could indicate that the negotiations are still at an early stage or that the government wants to avoid weakening its negotiating position by revealing too much information too early.

Trade Secretary Jonathan Reynolds announced in a letter to the Trade Remedies Authority that he intends to reject the authority's recommendations and make a different decision by introducing lower import limits on steel from certain countries. These measures are intended to ensure the overall effectiveness of the UK's safeguards for domestic steel producers while maintaining security of supply for the UK market. In June 2025, the UK introduced tighter-than-expected trade restrictions on steel, limiting imports from Vietnam, South Korea, and Algeria to better protect domestic supplies from the consequences of a global trade war.

Resistance from the EU: Europe's car industry sounds the alarm

The planned EU steel tariffs have sparked controversy not only in Great Britain but also within the EU itself. The European Automobile Manufacturers' Association has warned that these measures could endanger the domestic automotive industry. The association emphasized that European car manufacturers source approximately 90 percent of their steel directly from the EU and are particularly concerned about the inflationary impact these restrictions will have on prices in the European market. The significant reduction in quotas and the doubling of the out-of-quota tariff to 50 percent would severely limit the ability to alleviate market shortages through imports.

ACEA Director General Sigrid de Vries acknowledged the need for some degree of protection for the steel sector, but stated that the parameters proposed by the Commission were too broad and would isolate the European market too much. She called for a better balance between the needs of European steel producers and European steel consumers in this sector. The new rules of origin, based on the melt-and-cast principle, would restrict imports and impose a significant administrative burden on European consumers of imported steel products.

The challenge of decarbonization and carbon border adjustment

The global steel industry is under enormous pressure to reduce its CO2 emissions and become climate-neutral by 2050. The European Union has set ambitious goals with its Green Deal and the Fit for 55 package. As part of these efforts, the Carbon Border Adjustment Mechanism (CBAM) was introduced. A transitional period with reporting obligations has been in place since October 2023. From January 1, 2026, the CBAM will apply to importers of certain emission-intensive goods into the EU. These primarily include products from the iron and steel, aluminum, cement, electricity, fertilizer, ammonia, hydrogen, and iron ore sectors.

The CBAM aims to create a level playing field for domestic and foreign manufacturers, make the carbon price more effective, and promote climate-friendly production worldwide. For the steel industry, this means additional costs and administrative burdens, particularly for imports from countries with lower environmental standards. The British steel industry, already struggling with high energy costs and transformation costs, faces further pressure from CBAM while simultaneously attempting to decarbonize its own production.

The economic impact: Tens of thousands of jobs at risk

Despite its decline, the UK steel industry remains a significant employer. The steel sector directly employs 33,700 people, and a further 42,000 jobs depend on the wider supply chain. Wages in the steel industry are on average 26 percent above the national median and 35 percent above the regional median in Wales, Yorkshire, and Humberside, where the majority of steel jobs are located. In 2023, the UK steel industry contributed £1.8 billion directly to the UK economy, a further £2.4 billion through supply chains, and £3.4 billion to the UK trade balance.

The Community trade union estimates that around 80,000 jobs depend directly or indirectly on the steel industry, taking the entire value chain into account. With around 80 percent of British steel exports going to Europe, the planned EU measures pose a fundamental threat to the industry, as well as to the thousands of jobs and communities it supports across the country. The loss of these jobs would particularly hit regions already struggling with the effects of severe deindustrialization.

The search for solutions and demands on politics

The UK steel industry faces the difficult task of finding alternative markets and increasing its competitiveness. UK Steel is calling on the government to take comprehensive action to improve the industry's competitiveness. These include, in particular, the lowest industrial electricity prices in Europe, the competitiveness of steel scrap and recyclability, a partnership between government and industry, and investment in innovation. UK Steel proposes the introduction of a bidirectional Contracts for Difference mechanism for wholesale electricity, which would align UK industrial electricity prices with those in France and Germany.

The organization also calls for the increase in network charge compensation to 90 percent to be applied retroactively from April 2025 to avoid another year of excessive costs for British producers. With these measures, the government could finally address the inequality in industrial electricity prices. Gareth Stace emphasized that the price is enormous. By securing competitive electricity prices, the UK can build a modern, low-carbon steel industry that supports clean energy, infrastructure, and manufacturing for decades to come.

Unequal rescue operations: The case of Scunthorpe and Port Talbot

While the blast furnaces in Port Talbot have already been closed, the steelworks in Scunthorpe, owned by the Chinese company Jingye and operating under the name British Steel, is in a similarly precarious situation. In April 2025, the British government took extraordinary measures to save the plant. Parliament was convened for a rare Saturday session to pass emergency legislation allowing the government to take control of the steelworks in England. This was the first such parliamentary session since 1982. Prime Minister Starmer declared that the future of British Steel hung in the balance, with economic and national security at stake.

The different treatment of Port Talbot and Scunthorpe caused controversy. Welsh politicians accused the British government of double standards. Liz Saville-Roberts, leader of Plaid Cymru in Westminster, noted that Scunthorpe was receiving assurances, while Port Talbot had only been given a sign. She criticized the government's decision not to intervene in Wales and described the day as one of deep disappointment for Port Talbot. However, the government argued that the circumstances of the two steelworks were different, and that Port Talbot was in a more advantageous position due to the Labour government.

Uncertain future prospects for a former industrial giant

The long-term prospects for the British steel industry remain extremely uncertain. Without successful negotiations with the EU on country-specific quotas or exemptions from the planned 50 percent tariffs, the industry could face existential collapse. Following a complete switch to electric arc furnaces and the elimination of primary steel production, the United Kingdom would be the only G20 nation unable to produce primary steel from iron ore and coal. This would significantly weaken the country's strategic autonomy and industrial base.

The once-mighty British steel industry has shrunk dramatically since its peak in the 1970s and now accounts for just 0.1 percent of the economy. This is another severe blow for the birthplace of the industrial revolution, which once claimed global renown. The industry faces the Herculean task of asserting itself in an increasingly protectionist global environment, while simultaneously managing the most expensive energy supply among the G7 countries and investing in costly decarbonization. Whether the British steel industry can overcome these diverse challenges will depend significantly on the government's ability to create the necessary framework and conduct successful international negotiations.

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