Today’s Parliamentary recall was remarkable in that, rather than concerning a matter of international security or war, the debate centered on a process that will likely lead to nationalization of British Steel. The plant at Scunthorpe is at risk of closure, following a stand-off between its Chinese parent company Jingye and the British Government.

As Business Secretary Jonathan Reynolds told Parliament today, the recall marks a sea change in the Government’s approach to industry. This afternoon, a bill was passed in the House of Commons which, if enacted, would essentially bring the blast furnaces under direct public control. It is not yet full nationalization, but it is hard to see how that can be avoided, unless there is a willing buyer for a firm which Reynolds effectively deemed worthless.

In the short term, this decision has saved thousands of jobs in Scunthorpe and supply chains around the UK. However, critics will call it a knee-jerk reaction and a return to the bad times of picking winners.

To understand the state of British industry, it’s worth looking back at the last half-century. By the late-Seventies, the state was spending around £16 billion a year (in 2025 prices) on subsidies and regional grant programs for private businesses. On paper, this seemed expensive. It also forced politicians and civil servants to engage with the messy world of UK plc.

So from the early Eighties, industries such as steel were left to stand on their own two feet. The Government would step back and provide a safety net for workers through retraining programs and the welfare system, but it would no longer be an active force in British industrial policy. The country might lose dozens of major employers following this approach, the theory went, but at least it would be cheap.

Yet, in new research for the Council of National Resilience, colleagues and I have found that those savings never really materialized. Data since 1980 on state subsidies for businesses, employment programs and working-age welfare reveals that all that Britain did was shift the bill. Since 1980, we estimate that letting industries such as steel and carmaking shrink has cost the Exchequer £172 billion, primarily through higher working-age welfare expenditure. In 2024, the additional cost compared to the previous system of subsidy and support is likely to be over £30 billion a year. Clearly, spending more on welfare at the expense of supporting strategic industries — and the exports they generate — is a bad deal.

Research by Sheffield Hallam University in 2016 mapped the major losses of UK industries since the Eighties, with many of these places previously identified as “left-behind” neighborhoods. Decades later, the more dynamic industries of the future have never materialized at scale. The loss of British Steel would have greatly extended the list of left-behind areas.

Ultimately, governments have a choice: they can subsidize industries to sustain jobs, communities and the national interest, or they can subsidize people to stay at home on welfare. Keir Starmer’s Labour seems to be opting for industry and jobs. However, today’s action to protect the blast furnaces cannot be the end of the matter. As highlighted in the debate, the UK also needs raw materials, supply chains and domestic demand.

British Steel has shown, however, that you can only subsidize and work with industrial partners which share your interests. In the Seventies, most strategic industries were British-owned. This relationship wasn’t always smooth but, in theory at least, there were common interests. Now, 44% of UK manufacturing’s Gross Value Added is foreign-owned.  Overseas firms own business assets worth the entire economic output of the North and the Midlands. As shown by the example of British Steel, these owners do not always have our best interests at heart.

Reynolds claims that Labor is taking a different approach to those pursued over the last 50 years. This is welcome, yet it is not as simple as part-nationalizing a single business. While constructing a new industrial model will be messy and expensive, it is necessary in an uncertain world. What’s more, it is cheaper than any decision that would further bloat the welfare bill and leave more British regions behind.

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Andrew O’Brien is the former Director of Policy at the think tank Demos and currently Head of Secretariat of the Independent Commission on Neighbourhoods. He writes in a personal capacity.

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