In the United Kingdom, government intervention in the private sector has long focused on rescuing firms from mishaps and mistakes. With policies oscillating between privatization and emergency nationalizations, the state has consistently failed to build the governance infrastructure that would enable either approach to serve the common good.

The debate about whether to nationalize British Steel should be considered in this context. Once again, no one is asking the key question: Does the state have the sectoral expertise, long-term financing tools, and institutional coherence needed to cultivate a modern, green, competitive steel sector? The answer matters, because much more than the UK steel industry is at stake. The same question must be asked of any sector that might be brought under “public control,” and many lessons from Britain’s experience will be applicable elsewhere.

Reviving the UK’s steel sector calls for a mission-oriented industrial strategy. The goal should not be merely to save the industry but to transform it. That means ensuring that any public ownership stake, subsidy, loan, or guarantee is conditional on the sector modernizing, becoming more sustainable, and improving working conditions.

British Steel’s current crisis was long in the making. The company was formed in 1967, when Prime Minister Harold Wilson’s Labour government nationalized more than a dozen firms to create one of the world’s biggest steel producers. It was then privatized and broken up by Prime Minister Margaret Thatcher’s government in the 1980s—and has struggled ever since, owing to foreign competition and a lack of the patient, long-term investment needed to sustain a capital-intensive, high-fixed-cost, cyclical business.

When British Steel’s current owner, the private Chinese steelmaker Jingye Group, threatened to close its Scunthorpe blast furnaces in March 2025, Parliament responded with emergency legislation, and the UK government has since provided more than £400 million to keep the site running. But this was only the latest in a long-running series of crises.

Following its privatization in the 1980s, British Steel changed hands repeatedly until being sold to the private equity firm Greybull Capital for a nominal £1 in 2016, with its workers suffering pay cuts and reductions to their pensions. The company’s prospects then darkened further as Greybull loaded it up with debt and extracted management fees, while investing less than £20 million of its own money. By 2019, British Steel was insolvent, with the public sector left to pick up the tab. The UK Insolvency Service spent £600 million running the company for nine months, until Jingye took over. It was only a matter of time before the cycle would repeat itself.

There is a broader principle at stake here. The UK has a bad habit of socializing risk and privatizing rewards, with the government repeatedly stepping in to nationalize firms once they have reached the brink of collapse, with strategic assets ultimately being sold off at a discount. In 2013, for example, 60% of Royal Mail was sold in a transaction that undervalued the firm by £180 million. The share value jumped by 38% on the first day of trading, creating an immediate £750 million windfall for private investors.

Fortunately, the recent revival of industrial policy offers an opportunity to break this cycle and forge a new social contract between the public and private sectors. That starts with attaching meaningful conditionalities to public support: profit-sharing above certain thresholds, equity stakes, royalty rights, and requirements to maintain employment and pursue decarbonization.

The German development bank KfW, for example, requires loan recipients to pay workers well, green their supply chains, and channel some profits toward productivity-enhancing investment. Thanks to such inducements, Germany’s own steel sector has begun to modernize and deliver material efficiency improvements. That puts Germany in a good position, because the global demand for steel in clean technology manufacturing (including wind turbines, electric-vehicle infrastructure, rail networks, and electricity grids) is projected to triple by 2035.

Still, steelmaking currently accounts for around 10% of global greenhouse-gas emissions, and for about 2.5% of the UK’s emissions. Any nationalization of British Steel therefore must devise a concrete, time-bound plan for transforming or replacing the Scunthorpe blast furnaces with greener alternatives.

Cross-party support for nationalizing British Steel is driven by the increasingly mainstream belief that domestic steelmaking is a critical “sovereign capability.” Steel, after all, is a direct input in defense products and in industries like construction and essential infrastructure (including rail and wind turbines). But if the UK government intends to adopt this framing, it must also consider essential sectors like water, energy, and medicine as “sovereign capabilities” that should serve the common good.

Andy Burnham, the mayor of Greater Manchester who is now challenging Prime Minister Keir Starmer’s leadership, appears to acknowledge this imperative in calling for “public control” of energy, housing, water, and transportation. But the question remains: Does the UK government have the necessary capacity and skills to run these industries effectively?

Sovereign capability is distinct from the concept of state capacity. It describes merely the ability to produce key resources within a national boundary, whereas state capacity refers to the institutional bandwidth, expertise, and organizational routines that equip public-sector agencies to govern production well. Effective governance requires not just the structural authority to set direction, but the dynamic capabilities to experiment, learn, and reconfigure one’s strategy in the face of uncertainty. 

Nationalizing British Steel could help create a modern, green steel sector in the UK, but only if the state is committed to governing it for the common good, which means investing in the institutional capacity and capabilities to do so. Otherwise, nationalization risks perpetuating the familiar pattern: the public sector foots the bill for private-sector failures, rather than shaping markets in a more sustainable direction. - Project Syndicate

Mariana Mazzucato, a professor at University College London, is Founding Director of the UCL Institute for Innovation and Public Purpose and the author of many books, including The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes Our Governments and Warps Our Economies (Penguin Press, 2023) and The Common Good Economy: A New Compass (Allen Lane, 2026). Anna Hope Emerson is a research fellow at the UCL Institute for Innovation and Public Purpose.

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