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The government’s plans to provide cash grants to businesses for innovative new steel projects have been scrapped. Despite this, ministers remain committed to fulfilling their manifesto promise of investing £2.5bn in the steel industry and are exploring alternative funding options for businesses. The decision to forgo a competition that would have awarded grants for new ideas was made in order to prioritize supporting struggling steelworks instead. The government aims to foster a competitive business environment within the steel industry by helping remaining steelworks become profitable businesses.
The UK’s steel sector has encountered significant financial challenges in recent years due to various factors such as high energy costs, increased tariffs, and oversupply in the global steel market. Maintaining the ability to produce primary steel is viewed as a matter of national security by Downing Street. Currently, four out of the six main steel companies in the UK receive some form of financial assistance from the government. Labour had pledged to allocate £2.5bn to the steel industry in its election manifesto, with plans to include a competitive process for companies to bid for government grants for steel projects.
The Department for Business and Trade (DBT) had initially proposed a competitive process where companies could apply for government grants for steel projects, but a decision was made not to proceed with this plan. Instead, businesses will still have access to funding for steel projects through the government’s National Wealth Fund, with bids requiring some private financing and competing with other sectors. The National Wealth Fund, launched by the Treasury, has funds available to support industrial and clean energy projects, with specific allocations for steel projects that could be announced soon.
Government sources affirm that the steel sector will continue to receive substantial support, including assistance with energy prices and procurement. While government funding remains available for steel investments, the private sector will be responsible for determining which opportunities they wish to pursue. Ministers regard their support for the steel industry as a significant political achievement following the previous general election. Despite this, concerns persist within Whitehall regarding the sector’s financial sustainability, particularly in light of recent developments such as the European Union’s proposal for a 50% steel import tariff
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