Steel and economic security in the UK

Steel and economic security in the UK

Steel was the catalyst for the industrial revolution and was key to the making of modern Britain. From the railways carrying commuters to the turbines generating electricity, steel underpins much of the infrastructure on which the UK economy depends. Its importance to defence, construction and advanced manufacturing help explain why governments repeatedly intervene when domestic production is threatened.

With the UK government now pursuing “reindustrialisation"^[1] while its trading partners strengthen their own industrial defences, steel production has become an increasingly important trade policy issue. Maintaining domestic production brings potential benefits for resilience and investment, alongside difficult questions about the costs borne by taxpayers and the businesses that turn steel into finished products.

Why does the world have so much steel capacity?

For governments seeking secure supplies for defence, infrastructure and essential industries, maintaining domestic steel production is a national security requirement. Losing a plant can mean losing specialist equipment, technical knowledge and qualified workers that would take time and investment to replace. These concerns sit alongside a boom in global supply, driven in large part by China’s industrial development and the expansion of steelmaking capacity supported by state subsidies. As Chinese supply has outpaced domestic demand, more of that output was exported to buyers overseas, adding to competitive pressures in the UK. This leaves the UK Government facing a difficult balance between protecting strategic capabilities at home whilst maintaining its commitments to fair and open trade.

What has the UK government done?

In the UK, the government has responded with a steel safeguard measure that took effect on 1 July 2026, following the expiry of the previous safeguard^[2]. The final arrangements reduced overall tariff-free quota volumes by 51%, with a 50% duty applied to imports outside of those quotas. For domestic producers, tighter import controls can provide space to maintain production and invest, particularly when competing with foreign suppliers who benefit from support unavailable to businesses in the UK.

For manufacturers purchasing steel, the same restrictions create additional costs and uncertainty. The specific type of steel is also important as a business may depend on imported grades, dimensions or specifications that are difficult to source domestically^[3]. Where finished products face higher costs for their steel inputs, UK manufacturers may also find themselves at a disadvantage against overseas competitors.

Steel Strategy

Within the UK, the March 2026 Steel Strategy sets an ambition to restore domestic production to around 40–50% of domestic demand, compared with 30% in 2024^[4]. Electricity prices, access to finance and the visibility of future orders will be the key factors that determine the industry’s success. Government procurement can also contribute by giving suppliers clearer information about forthcoming infrastructure and defence requirements.

As producers move towards lower-emission processes such as electric arc furnaces, the highly capital-intensive transition puts further strain on British industry. The government-commissioned Primary Steelmaking Review^[5] examines the role of greater use of electric arc furnaces and what can be done to help businesses transition smoothly.

The UK has the most expensive energy in the IEA^[6], which makes it hard for domestic heavy industry to remain competitive internationally.  While electric arc furnaces are much more efficient than traditional blast furnaces, they still require large amounts of energy. If UK steel is to remain internationally competitive, it will depend heavily on access to reliable, competitively priced electricity, alongside grid capacity and predictable long-term energy costs.

The viability of these furnaces will also depend on the availability of suitable scrap, the capacity to process it and access to primary iron. The government hopes that securing these supplies, alongside investment in equipment and skills, will help British steelmakers remain competitive, whilst providing the UK with its own secure supply of steel products.

Domestic demand

To boost demand for UK steel, the government’s Strategy seeks to exploit the government’s buying and market shaping powers to support UK steelmakers. On public procurement, the strategy promotes reforms to public procurement rules to help UK producers compete for contracts. In the energy sector, the Clean Industry Bonus gives offshore wind developers an incentive to invest in UK steel manufacturing. Alongside these measures, the government is considering proposed emissions reporting and procurement guidance which could help build a wider market for lower-carbon steel.

However, public purchasing has limited reach, with the public projects captured in the strategy’s figures accounting for just 3.1% of UK steel demand^[7], meaning that government’s direct impact on demand will be limited and that delivering a sustained boost to order books will depend on steelmakers’ ability to supply customers’ needs at competitive prices.

The Economic Prosperity Deal

The UK-US Economic Prosperity Deal provides another example of the connection between steel and economic security. Announced in May 2025, the deal envisaged preferential access to the US for UK steel and aluminium through quotas. The subsequent US implementation framework linked those arrangements to conditions that included the UK implementing new supply-chain security measures.

As time has passed, the difference between negotiated commitments and de-facto trading conditions has remained. The UK initially secured a commitment for a quota of steel in June 2025 at Most Favoured Nation rates, but this has still not been delivered. However, the UK has enjoyed lower tariffs of 25% on steel relative to the rest of the world which have seen their tariffs increase to 50%.

International cooperation

With the UK and EU seeking to preserve strategic steelmaking capabilities, closer cooperation could provide a platform for a ‘steel alliance’, potentially including the US. The economic case would be to combine action against subsidised competition with more reliable access to each other’s markets. This could allow producers to serve a larger customer base, support investment in specialist capabilities and reduce the pressure for each country to replicate every stage of production domestically. It would also mean that individual countries would not have to produce each grade of steel that they required domestically and could instead draw on a network of like-minded allies to maintain secure access to steel capability.

For any alliance to succeed, participants would need to align their desire to protect domestic producers with the benefits of trading between themselves. A workable arrangement would need agreement on market access, the treatment of subsidies & carbon pricing, and how steel’s origin is verified to prevent restrictions being circumvented.

The Milwaukee Framework agreed through the Global Forum on Steel Excess Capacity on 30 September 2026 provides a platform for coordinated action on oversupply^[8]. However, moving towards a closer steel partnership that grants preferential access to each other’s markets is still someway off and would require negotiations and political trade-offs between participants.

Closer cooperation with Europe and other steel-producing countries, such as Australia, Canada, Japan and Turkey could offer a way forward. However, such a partnership would still involve difficult choices over whose producers gain market share and whose bear the costs of restructuring. Differences in energy costs, subsidies and carbon pricing could also leave members concerned that opening their markets would expose domestic plants to competition on unequal terms. Progress would therefore depend on governments accepting some constraints on their own industrial policies in return for more secure access to partners’ markets.

What can businesses do now?

For businesses buying or selling steel, changes to tariffs and trade rules could increase costs or make some markets harder to access. Importers should check which tariffs and quotas apply to their products, who pays any additional duties under their contracts and whether alternative suppliers are available. Exporters should review changes in their overseas markets and the documents needed to prove where their steel was made. If you would like to understand what these changes mean for your business, Deloitte’s trade specialists are on hand to help.

^[1] Healey to promise 'new age of industrialisation' for UK in conference speech

^[2] UK's steel trade measure from 1 July 2026 - GOV.UK

^[3] Steel Tariffs Risk Serious Damage To UK Manufacturers  - British Chambers of Commerce

^[4] The UK steel strategy (web version) - GOV.UK

^[5] UK primary steelmaking review 2025

^[6] Why Britain pays more for electricity

^[7] The UK steel strategy (web version) - GOV.UK

^[8] 2026 Ministerial Meeting of the Global Forum on Steel Excess Capacity