The government has signalled it will block a controversial payout to foreign investors over the collapse of British Steel. Sources inside the Department for Business and Trade confirm ministers are preparing to use national security powers to stop the compensation claim.
It is a high-stakes gamble. The claim, filed by a US-based hedge fund, seeks hundreds of millions over the nationalisation of British Steel's pension scheme in 2020. The fund argues the takeover of the scheme violated investment treaties.
But Number 10 sees it differently. This is about protecting British industry, they insist. Letting a foreign fund extract cash from the taxpayer would set a dangerous precedent. The message from ministers is clear: we will not be bullied.
The decision comes amid a broader Tory push on economic nationalism. With an election looming, the government wants to be seen defending British jobs. British Steel, based in Scunthorpe, employs thousands. Its revival under new ownership is a totemic issue in Red Wall seats.
Yet the legal risks are significant. The fund, which bought up distressed debt, has deep pockets. It will likely challenge any block in international arbitration. A costly legal battle looms. But Whitehall sources insist the government has a strong case. National security exemptions are rarely tested, they note, but this is exactly the scenario they were designed for.
Opposition MPs have seized on the confusion. Labour accuses ministers of incompetence, saying the claim should have been settled earlier. The Lib Dems question the use of national security powers, calling it a "blunt instrument."
Backbenchers, however, are rallying. A group of 40 Tory MPs has tabled an amendment demanding the government block the payout. They are emboldened by recent polling showing public support for protecting domestic steel.
The Treasury is nervous. Blocking the claim could damage investor confidence, they warn. But the political calculation is clear. The prime minister has personally signed off on the strategy. He sees it as a wedge issue against Labour, which has avoided taking a firm stance.
Behind the scenes, senior civil servants are scrambling. The Department for International Trade is consulting legal experts. A formal announcement is expected within weeks. The precise powers to be used remain under wraps, but the Land Compensation Act and national security clauses are being studied.
For now, the message is defiance. The government will not write a cheque to foreign speculators. Whether that stance holds in the face of legal pressure is another matter. But in the corridors of power, the game is being played. And for once, industry has the upper hand.
