Labour offer Chinese group multi-million pound compensation deal in British Steel dispute

Sources familiar with the discussions said the proposed settlement is understood to be below £100million.

The approach marks a shift from the Government’s earlier position that the shares in the Scunthorpe based company held no financial value.

Jonathan Reynolds previously suggested there was no justification for compensating the Chinese owners.

Officials are now seeking a negotiated outcome to end the dispute surrounding the ownership and future operation of the steelmaker.

A Government spokesman said: "We are continuing discussions with Jingye to agree a pragmatic and realistic solution to secure the long-term future of the site."

The Chinese conglomerate is understood to be seeking a significantly larger payment from the UK Government.

Jingye, who has appointed the law firm Linklaters to pursue its compensation claim, have faced intense scrutiny over their links to the Chinese Government amid the dispute.

The group have denied these claims and emphasised their operation as a private company.

The company is reportedly seeking around £1billion in compensation.

Jingye has argued the figure broadly reflects the total investment it has made into British Steel since acquiring the business out of insolvency in 2020.

The difference between the Government’s proposed settlement and the sum sought by Jingye highlights the scale of the dispute.

Industry sources indicated that a range between £50million and £100million could represent an initial position for negotiations, Sky News reported.

The financial cost of maintaining the company’s operations has continued to rise since the Government intervened.

Running the steelmaker is currently costing the public purse more than £1million per day.

The move to take control came as Sir Keir Starmer’s Government acted to prevent Jingye from closing the country’s last operational blast furnaces at the Scunthorpe site.

Such a closure would have threatened thousands of jobs and ended the UK’s remaining capacity to produce virgin steel using blast furnace technology.

British Steel is now approaching the first anniversary of being placed under Government management.

Before taking operational control, ministers offered a £500million support package to help the site transition to electric arc furnace technology.

Electric arc furnaces can produce steel using recycled materials and are considered less carbon intensive than traditional blast furnace production.

However, the shift would also end Britain’s longstanding ability to produce virgin steel domestically.

Russell Codling, director of markets and business development at Tata Steel UK, warned MPs last month urgent action was required to safeguard the industry.

Mr Codling told the Business and Trade Select Committee: "If the UK doesn't act, we won't have a steel industry not many months from now."

The Government has also appointed advisers to explore potential strategic options for the sector.

Bankers at Evercore have been asked to provide advice on possible next steps.

Interest in acquiring British Steel has reportedly emerged from several potential investors.

Turnaround investor Michael Flacks is understood to be considering a bid to acquire the company and combine it with his European steel operations.

Meanwhile, Blastr and Arabian Gulf Steel Industries have submitted bids for Speciality Steels UK, which entered liquidation last summer.

Discussions between ministers and Jingye over a possible settlement remain ongoing and no final agreement has yet been reached.

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