Britain’s embattled army fights another threat – the push for green steel

Military kit such as Challenger 2 tanks are a source of high-margin contracts for steelmakers - Cpl Si Longworth RLC/Ministry of Defence
Military kit such as Challenger 2 tanks are a source of high-margin contracts for steelmakers - Cpl Si Longworth RLC/Ministry of Defence

The British Army is at its lowest point in decades, with it emerging this week that a US general warned Defence Secretary Ben Wallace that the depleted force was unable to protect Britain and its allies.

Years of under investment and neglect have left our military in a “dire state”, defence select committee chair Tobias Ellwood admitted.

Yet the Army faces another threat from an unusual source: the parlous state of the British steel industry.

Almost half of steel for defence projects already comes from abroad and industry insiders fear that this figure will rise further unless the Government can commit more funding to keep domestic production afloat.

The UK is offering the two biggest steel plants, British Steel and Tata, £600m to press ahead with slashing carbon output. However, steel sector insiders point out this is only a fraction of the £6bn the industry needs to green.

Without more support to decarbonise, many uncompetitive mills will be forced to slow or stop production, they warn. That will leave Britain ever more reliant on overseas supplies to build its tanks, ammunition and weaponry.

“Generally, these days, we're looking more at localisation rather than globalisation and you also want alternative sources of supply to make your supply chain more resilient,” says Stuart Young, visiting fellow at Cranfield University and an expert in defence procurement.

Shadow Defence Secretary John Healey says: “Buying British steel for defence is a no-brainer. It strengthens our UK economy and our sovereignty.”

The threats to the domestic industry are clearly seen at British Steel, the Chinese-owned company that is currently seeking support from the Government to keep afloat.

The Government has offered £300m of support to help the firm decarbonise its massive Scunthorpe-based plant and maintain jobs in the area. However, Chinese-owner Jingye plans 800 job cuts in a move that would weaken the Government’s rationale for offering support.

HMS Queen Elizabeth aircraft carrier was built with steel manufactured in Scunthorpe - Jay Allen/Ministry of Defence/Crown
HMS Queen Elizabeth aircraft carrier was built with steel manufactured in Scunthorpe - Jay Allen/Ministry of Defence/Crown

Other governments around the world are offering far more generous support to go green.

Last year, ArcelorMittal started a $1.8bn (£1.5bn) Canadian project to make green steel using hydrogen, with half the cost fronted by the Government.

In Germany, authorities approved €1bn of support for steelmaker Salzgitter to use hydrogen in its processes to replace coal.

The scale of support available elsewhere means investing in Britain appears to be a poor bet, insiders fear. This is particularly troubling given the sector’s reliance on overseas cash.

The state of affairs has prompted concerns about how new armour, ammunition and other equipment will be built. A rush to re-armour in the West in the wake of the war in Ukraine risks leaving Britain “at the back of the queue” when trying to secure international steel, warns defence analyst Francis Tusa.

“Every other army is saying 'we've not got enough artillery shells: buy, buy buy'.”

While it is not a large percentage of the business for the steel industry, contracts from the forces are often for high-margin, specialist grades.

Liberty Steel, the third-biggest steel maker, counts defence firm BAE Systems as a client, as well as Leonardo Helicopters. Last month, it announced the mothballing of two plants and 440 job losses.

British Steel metal smelted in Scunthorpe has made its way into the Royal Navy’s Queen Elizabeth II aircraft carrier, among other ships.

Innovation has led to more secretive armour being developed in the UK, such as the Chobham armour, which is thought to be ceramic-based and protects the army’s Challenger 2 tanks. A steel plate called Super Bainite was also championed by the MoD for its “outstanding ballistics properties”.

Tata Steel, owner of Britain’s biggest steel mill at Port Talbot in Wales, holds the licence for Super Bainite, an ultra-hard armour for fighting vehicles designed by the Defence Science and Technology Laboratory (DSTL). Tata too wants government help to support its business.

Elsewhere, Sheffield Forgemasters makes components for Britain's nuclear submarine fleet. It was rescued by the MoD in 2021 partly because of this, suggesting that the Government is aware of the need to protect some military steelmaking, says Tusa.

Competition rules from the World Trade Organisation exempt defence purchasing, meaning the Government could support the wider industry with contracts for specialist steel if it chose to.

Instead, orders have been placed with European competitors. Mills in Sweden have been used for some steel for Britain's armed vehicles and ships in the past.

“Look at the sort of average labour cost there compared to here,” says Tusa, suggesting that with some effort, this work could return.

In 2021, the last year where figures are available, the UK bought a total of £8.25m of steel for defence projects including the new Dreadnought submarine, Type 26 frigate and Type 31 frigate. Only £4.24m was from UK mills.

Britain is now the eighth biggest producer in Europe, behind Austria and Belgium. China dominates the industry, making half the world’s steel.

But in the late 1960s, the UK was the world’s fifth largest steel producer, dropping to 10th by the 1980s and 18th by 2015.

Scrutiny of domestic steel supply comes as production of supplies for the armed forces ramps up globally. NATO members have committed to hundreds of billions of pounds worth of extra spending in the coming years, much of which will go on equipment and munitions.

The steel sector would also like the UK to buy British not just for tanks, ships and jets, but also MoD projects such as homes and buildings.

Construction projects are routinely farmed out and contractors will buy cheap imported steel, such as the staves used in reinforced concrete, known as rebar, from China.

Shadow Defence Secretary Healey says Labour would set “a higher bar for buying abroad”.

“Our green steel pledge will partner with industry to help firms decarbonise and remain competitive.”

For Tusa, the defence expert, lessons should be learned from the swift pace of change in geopolitics over the last few years. A reliance on overseas supplies of everything from natural gas to computer chips quickly flipped from being an advantage to a drawback.

Boosting British steel not only improves resilience but also helps the economy, he points out.

“If you could buy from a British company with the tax revenues coming back to the Treasury, etc., doesn't that make some sense?”

A government spokesman said concerns were “unfounded” as “UK defence is not a major consumer of steel”.

They added: “The Government recognises the vital role that steel plays within the UK economy, which is why we are seeking to secure a sustainable and competitive future for the UK steel sector. Steel and other industrial sectors can already bid into funds worth more than £1.5bn to support them going green, cutting emissions and becoming more energy efficient.”