British officials are moving to block a controversial payout to the owner of British Steel, sources confirm, as a sovereignty review threatens to derail the deal. The proposed payment, worth hundreds of millions of pounds, has drawn scrutiny from Whitehall mandarins who fear it could compromise national interests.
Documents obtained by this newspaper reveal that the Department for Business and Trade has instructed advisers to examine the legality of the payout, which is tied to the sale of the steelmaker to a foreign entity. The move comes amid growing concerns over the loss of strategic industrial assets to overseas buyers.
'I can confirm that officials have raised serious questions about the transaction,' a senior government source said. 'There is a sense that this could set a dangerous precedent for how we handle critical infrastructure.'
The payout, believed to be a performance-linked bonus for the current owners, has been criticised by unions and MPs as a 'reward for failure.' British Steel, which employs 4,000 workers, has struggled with high energy costs and weak demand since being rescued from collapse in 2020.
The sovereignty review, launched by the Cabinet Office last month, is examining the national security implications of foreign takeovers. Insiders suggest the British Steel case could be a test for the new powers granted under the National Security and Investment Act.
'This is about more than just one company,' said a Whitehall insider. 'It's about whether we allow our industrial crown jewels to be stripped for parts.'
The Treasury has remained tight-lipped, but sources indicate that Chancellor Jeremy Hunt is 'watching closely.' A decision on the payout is expected within weeks.
Meanwhile, British Steel's owners have declined to comment, citing commercial sensitivities. But one adviser close to the deal warned that blocking the payment could deter future investment.
'If the government reneges on its obligations, it will send a chilling signal to global investors,' the adviser said. 'But there's no denying that the political mood has shifted.'
The unfolding saga has reignited debate about the future of UK manufacturing. With steel prices volatile and green transition costs mounting, the sector faces an uncertain path.
This is a developing story. More to follow.
