Stop relying on private consultants with conflicts of interest to ‘mend’ the steel industry, says Plaid

Martin Shipton

Successive UK governments have relied too heavily on advice from private sector consultants about the future of the steel industry, according to Plaid Cymru.

The party’s Business and Trade spokesperson Llinos Medi has spoken out following revelations in the satirical and investigative magazine Private Eye about contracts awarded to the consultancy giant McKinsey.

‘Shambles’

The article in Private Eye states: “A belated recognition that the world’s sixth biggest economy needs a steel-making capability – and that Parliament must be recalled to salvage it – shows what a shambles successive administrations’ policy-making has been.

“This might be because it has been handed over to management consultants McKinsey under a series of deals that effectively outsourced decisions on how to deal with the economic, technical and even geopolitical questions involved.

“After the last government approved the sale of British Steel to Jingye of China five years ago, it brought in McKinsey on an £834,000 contract to advise on ‘options for the UK’s steel sector’. This was followed in 2021 with a £1m deal for the same thing. Then in 2022 came yet another contract, valued at £862,000.

“McKinsey was a heavily conflicted choice for trusted counsel. In the months leading up to the March 2020 deal, it had been working for, er, Jingye, and bending the ear of successive business secretaries Greg Clark and Andrea Leadsom at meetings, alongside the strongly state-controlled Chinese company.

“As Eye 1538 put it four years ago, with concerns such as dumping from China and given McKinsey’s extensive connections in the country, ‘the UK might do well to watch what insights China is gaining from all this’.

“This wasn’t the Eye’s first warning. In March 2020, after then Business Secretary Alok Sharma hailed the sale to Jingye as a ‘vote of confidence in the UK’s steel industry’ and Boris Johnson promised that the sounds of the steelworks ‘will ring out for decades to come’, Eye 1518 pointed out that nationalisation would have been a viable option and that ‘dependence on China’ was ‘the last thing Britain needs’.

“But with the help of the firm that advised Jingye on the deal, McKinsey, that’s what Britain has been left with.

“Current Business Secretary Jonathan Reynolds said last weekend he ‘wouldn’t put a Chinese company into our steel sector’. There’s one unhealthy dependence he does seem happy with, however.

“Last month Reynolds appointed consultants, at a cost of £415,000, to work on the ‘commerciality of primary steelmaking production in the UK’, providing ‘the evidence base to underpin subsequent policy decisions… [including] on spending up to £2.5bn in funding for the steel industry as outlined in the manifesto’.

“The lucky firm? Yep, McKinsey.”

‘Mishandling’

Plaid Cymru Business and Trade spokesperson Llinos Medi MP said: “Successive governments’ mishandling of the steel sector in Wales is exemplified by the reliance on private consultants such as McKinsey. Steel is a strategic resource, essential for industrial growth, so the industry’s future should not be in the hands of private consultants, but elected politicians accountable to the public.

“Safeguarding the future of steel in the UK will require additional money. Labour must say how much of its £2.5bn steel fund it will be investing in Scunthorpe and how does this compare to the funding it is giving to support Tata employees and the wider local economy of Port Talbot, as well as other areas such as Shotton and Llanwern. Wales must receive parity with the funding that Scunthorpe is getting to protect our steel communities.”

In December 2024 the Guardian reported how McKinsey had agreed to pay the US Department of Justice $650m over the next five years to resolve an investigation into the firm’s role in the opioid epidemic.

As part of the deferred prosecution agreement, McKinsey accepted responsibility for its role in the crisis and accepted wrongdoing outlined in the investigation. The charges against the firm will be dropped if the company follows the agreement’s terms over the next five years.

Obstructing justice

A former senior McKinsey executive also agreed to plead guilty to charges of obstructing justice after the former executive destroyed records relating to the firm’s work with the pharmaceutical company Purdue Pharma.

McKinsey had advised the OxyContin manufacturer Purdue Pharma for years, including ways the company could “turbocharge” sales of the addictive opioid drug. The firm was also accused of hiding its relationship with Purdue from the Food and Drug Administration (FDA) as it was working with the federal agency on drug policy.

The company has already paid nearly $1bn in settlements for its role advising opioid manufacturers, like Purdue Pharma. In 2021 it paid out $642m in a settlement with all 50 US states, five US territories and Washington DC to resolve various state-level prosecutions against the company.

McKinsey had maintained its settlements did not mean it admits any wrongdoing. But the company changed course after the justice department settlement, apologising for its role in the crisis.

“We are deeply sorry for our past client service to Purdue Pharma and the actions of a former partner who deleted documents related to his work for that client,” McKinsey said in a statement. “We should have appreciated the harm opioids were causing in our society and we should not have undertaken sales and marketing work for Purdue Pharma. This terrible public health crisis and our past work for opioid manufacturers will always be a source of profound regret for our firm.”