Rail deal worth £500m will help save Scunthorpe steelworks, says minister

A £500 million five-year deal has been struck between Network Rail and British Steel to help save the Scunthorpe steelworks, the Government has announced.

British Steel is to supply 337,000 tonnes of rail track, which will secure thousands of manufacturing jobs, in an agreement which comes two months after the Government used emergency powers to prevent the blast furnaces from immediate closure.

Transport Secretary Heidi Alexander, who is visiting the site in North Lincolnshire to finalise the deal, said it “truly transforms the outlook for British Steel and its dedicated workforce in Scunthorpe”.

British Steel is to supply a minimum of 337,000 tonnes of long and short rail.

A further 80-90,000 tonnes is to be provided by other European manufacturers and deals are expected to be announced shortly, the Department for Transport (DfT) said.

Blast furnaces

In March, Chinese firm Jingye, which bought British Steel in 2020, proposed to shut Scunthorpe’s two blast furnaces and other key steelmaking operations.

This came despite months of negotiations and a £500 million co-investment offer from the Government, the DfT said.

As a result, Jingye launched a consultation which it said would affect between 2,000 and 2,700 jobs.

In April, the UK Government used emergency powers to take control of British Steel and continue production at the site.

The Scunthorpe plant has been producing steel for Britain’s railways since 1865.

The Network Rail contract, worth an estimated £500 million, starts on July 1 and is set to provide the company with 80% of its rail needs.

To ensure security of supply, Network Rail is set to award smaller contracts to some European manufacturers, who will supply specialist rail products alongside British Steel.

‘Landmark contract’

Ms Alexander said: “This landmark contract truly transforms the outlook for British Steel and its dedicated workforce in Scunthorpe, building on its decades-long partnership with Network Rail to produce rail for Britain’s railways.

“After taking urgent action to step in and save these historic blast furnaces from closure, we’ve now helped secure their long-term future by backing British Steel with meaningful Government contracts, protecting thousands of skilled manufacturing jobs in the process.

“This crucial investment in our railway infrastructure shows we are delivering on our Plan for Change commitment to raise living standards in every part of the UK and ensure economic growth is felt by working people in our proud industrial heartlands.”

The agreement is the first major public procurement since the emergency legislation was passed.

The Government sees it as being complimentary to the UK and US trade deal which aims to lower tariffs and protect jobs across key sectors, including steel.

Business Secretary Jonathan Reynolds said: “This is great news for British Steel and a vote of confidence in the UK’s expertise in steelmaking, which will support thousands of skilled jobs for years to come.

“Following our decisive action to step in and save steelmaking at Scunthorpe in April, this contract will give the sector the security to supply the steel we need for the infrastructure of the future, as part of our Plan for Change.”

Network Rail’s group director for railway business services Clive Berrington said: “We are committed to buying British where it makes economic sense to do so and British Steel remain extremely competitive in the provision of rail and will remain our main supplier in the years ahead.”

Craig Harvey, British Steel’s commercial director for rail, added: “The contract represents a huge vote of confidence in UK workers and British industry, underpinning the vital role we play in ensuring millions of passengers and freight operators enjoy safe, enjoyable and timely journeys on Britain’s railways.”