Research and analysis

RPC opinion: impact of British Steel Limited regulations

Published 30 July 2026

Lead department	Department for Business and Trade
Summary of proposal	Introduce two linked statutory instruments to transfer a steel company into public ownership, and modify the effect of certain laws to support the transfer, and continued operation, of domestic steelmaking capability.
Submission type	Impact assessment – 19 June 2026
Legislation type	Secondary
Implementation date	2026
RPC reference	RPC-DBT-26177-IA-(1)
Date of issue	26 June 2026

RPC opinion

Rating[1]

RPC opinion

Fit for purpose

The IA provides a sufficient assessment of the statutory instruments as a specific use of powers under the Steel Industry (Nationalisation) Act 2026. The transfer is intended to maintain steel production in support of defence, critical national infrastructure and regional economic resilience. The Department now provides some case-specific evidence on the affected company, expected fiscal exposure, supply-chain resilience, employment, regional impacts and decarbonisation. The IA identifies regulatory and non-regulatory options, and explains why transfer into public ownership is considered necessary. The IA should estimate the scale of costs and benefits, particularly on fiscal exposure and decarbonisation impacts.

RPC summary

Category	Quality[2]	RPC comments
Rationale	Green	The IA explains why this specific use of powers under the Steel Industry (Nationalisation) Act 2026 is considered necessary, following the public interest test. It links the transfer to maintaining steel production in support of defence, critical national infrastructure and regional economic resilience. The Department should develop the measurable and time elements of its objectives.
Identification of options (including SaMBA)	Green	The IA identifies a longlist covering continued reliance on SISMA, financial support, public ownership, consensual acquisition and ending SISMA. It uses critical success factors to narrow the options. The SaMBA is sufficient because direct impacts are concentrated on one large firm.
Justification for preferred way forward	Green	The IA provides a qualitative appraisal of the preferred option. It explains that public ownership offers greater certainty, speed and control than the alternatives, and unquantified strategic benefits are expected to outweigh uncertain costs. The IA should provide quantified ranges for the impacts.
Regulatory Scorecard	Weak	The scorecard gives a qualitative account of welfare, business, household, regional, and decarbonisation impacts. However, for the specific exercise of the Act’s powers, it should provide quantified ranges, and scenario analysis, including for compensation, future support, capital investment and decarbonisation.
Monitoring and evaluation	Satisfactory	The IA identifies relevant evaluation questions, expected data sources, key performance indicators and a mixed-method approach. The plan should be improved with clearer baselines, reporting rhythm and success thresholds for the proposed metrics.

Summary of proposal

The proposal consists of two interdependent statutory instruments made to give effect to a specific use of the powers in the Steel Industry (Nationalisation) Act 2026 (“the Act”). The first transfers the property, rights and certain liabilities of a company to a Secretary of State-owned company. The second modifies the effect of certain laws so that the transfer can operate effectively in practice, including in relation to employment law and governance. The Department explains that a single IA is appropriate because the two instruments form one operative package and their impacts arise from the same policy objectives.

The IA states that the Secretary of State has assessed the statutory public interest test as being met. The central objective is to maintain steel production to support defence, the construction, maintenance and operation of critical national infrastructure, and the UK economy as a whole or regional economies. The IA considers alternatives, including financial support without ownership, consensual acquisition, and ending the SISMA direction. The preferred option is presented as a targeted one-off intervention rather than a sector-wide regulatory regime.

Rationale

Problem under consideration

The Department explains the risk of losing strategically important domestic steel capacity, with consequences for defence, critical national infrastructure, supply-chain resilience and regional economic activity. The evidence base collected describes the strategic role of steel. The IA identifies expected demand from construction, energy transmission and distribution, and defence, and states that the company in question accounted for a substantial share of UK crude and finished steel capacity in 2024. It notes that the company supports around 4,000 direct employees and wider supply-chain activity, particularly in Scunthorpe, Teesside and Skinningrove.

Argument for intervention

The rationale for intervention applies the public interest framework in the Act, to the specific circumstances of this intervention. The Department explains that transfer into public ownership is considered necessary to maintain steel production in support of defence and national security, critical national infrastructure and regional economic resilience.

Objectives and theory of change

The IA sets out an objective: maintaining steel production in support of defence, critical national infrastructure and economic resilience. The IA should be improved by setting measurable targets and timeframes for the indicators, particularly production continuity, financial performance and transition milestones.

The theory of change is clear: transfer into public ownership enables government to establish governance arrangements, manage the business and its assets, sustain production, and take informed decisions on investment, restructuring and transition. The theory of change identifies important assumptions and risks. These include effective execution of the transfer, clear governance and accountability, continued financial support, viable routes to restructuring or decarbonisation, and market conditions that do not materially undermine the viability of production. The RPC commends the Department for making explicit the assumptions supporting the logic model.

Identification of options

Identification of long-list options 

The IA identifies a reasonable range of regulatory and non-regulatory options for addressing the risks associated with the loss of domestic steelmaking capability, in this instance. The Department explains that the longlist was developed to test whether the intervention objectives could be achieved through less interventionist approaches before considering transfer into public ownership. The options considered include continuation under SISMA, provision of financial support without ownership transfer, consensual acquisition, ending intervention entirely, and transfer into public ownership through secondary legislation.

Consideration of alternative options to regulation

The IA identifies consensual acquisition as a non-regulatory alternative and explains this was pursued but did not lead to acceptable terms. The IA considers financial support without ownership, continuing under SISMA, and ending government intervention. The IA explains that the preferred option is necessary to achieve legal certainty and operational control.

Justification for short-listed options

The IA uses critical success factors to narrow the long-list and explains why several alternatives are not viable. The IA takes forward public ownership and consensual acquisition. The preferred option is presented as the only option providing sufficient certainty, speed and control to meet the policy objectives.

Small and micro business assessment

The IA explains that the measure directly affects a single large firm and does not impose direct regulatory burdens on small businesses. It notes that smaller downstream businesses may benefit indirectly from greater continuity and stability of domestic steel supply. On this basis, specific exemptions or mitigations for small and micro businesses are not required.

Justification for preferred way forward

Identifying impacts and scale

The IA states that many impacts of the intervention are difficult to quantify because they relate to strategic resilience, critical national infrastructure and wider economic stability. The Department identifies direct and indirect impacts associated with the preferred option, including operational continuity, supply chain resilience, employment effects, regional economic impacts and fiscal exposure. However, for the specific exercise of the Act’s powers, the IA should quantify the scale of impacts. Scenario-based ranges for future fiscal exposure, compensation outcomes, supply-chain resilience and decarbonisation effects would improve the justification.

The Department explains that the preferred option may involve substantial fiscal costs, including compensation liabilities, operational expenditure and future investment requirements. The IA notes that the Government has spent £504m under SISMA, equivalent to around £40m per month, and expenditure is expected to continue under the preferred option alongside potential additional costs. The IA identifies potential wider benefits associated with maintaining domestic steelmaking capability, reducing exposure to geopolitical disruption and supporting continuity of supply for strategically important sectors.

The IA identifies possible impacts on downstream firms, local labour markets and wider industrial confidence. The Department states that unmanaged disruption or market exit could generate substantial wider economic costs through supply chain instability, employment losses and reduced resilience. The analysis would benefit from clearer structure around how strategic resilience impacts and wider market effects are expected to interact, particularly where restructuring or transition decisions may alter the scale and distribution of impacts.

Counterfactual and baseline

The IA uses continuation of the current position under SISMA as the principal counterfactual. The IA explains that the counterfactual includes significant uncertainty regarding commercial viability, market conditions and operational outcomes. The IA would benefit from presentation of the baseline assumptions underpinning the counterfactual, particularly regarding operational continuity, future investment requirements and expected market behaviour absent intervention. Explicit articulation of the assumptions underpinning the baseline would strengthen transparency around the comparative appraisal of the shortlisted options.

Evidence and data

The IA draws on operational, financial and strategic evidence relating to domestic steelmaking capability, supply chain resilience and wider economic impacts. The Department uses internal analysis, sector evidence, market information and wider strategic considerations.

Uncertainty and risk

The Department explains that future market conditions, energy prices, global demand, compensation liabilities and commercial viability remain uncertain and may materially affect long-term outcomes. The IA recognises uncertainty surrounding future restructuring requirements, investment needs and decarbonisation pathways. The Department identifies risks associated with operational disruption, supply chain instability and wider market confidence under the preferred option and alternatives. The IA explains that transfer into public ownership may generate fiscal and operational risks, while arguing that unmanaged disruption or market exit would create potentially larger risks to resilience, employment and strategic capability.

The IA identifies risks relating to investor confidence, market behaviour and potential crowding-out effects. The Department explains that these impacts are difficult to quantify and may depend on future implementation decisions and wider market conditions. The IA would benefit from an explanation of how key risks will be monitored and reassessed over time, particularly where future restructuring or transition decisions may materially alter the balance of risks and benefits.

Selection of the preferred option

The IA explains why transfer into public ownership, through legislation, was selected as the preferred option. The Department argues it provides the greatest degree of operational certainty, strategic flexibility and government control, while supporting continuity of domestic steelmaking capability and reducing risks associated with unmanaged disruption. The IA explains why the preferred option was considered more robust and durable than continuation under SISMA, or financial support without ownership transfer. The Department explains that the preferred option creates greater flexibility for investment, restructuring and transition decisions. The IA identifies opportunities relating to operational modernisation and lower-emissions production technologies, while acknowledging uncertainty around commercial viability and investment requirements.

Regulatory Scorecard

Part A

The IA gives a mostly qualitative account of expected impacts on total welfare, businesses and households. The IA recognises that the preferred option may deliver significant non-quantified benefits through maintaining domestic steel supply, supporting critical infrastructure, improving supply-chain resilience and reducing the risk of concentrated regional economic harm. It identifies important costs and risks, including fiscal exposure, compensation uncertainty, operational support, capital investment, long-term liabilities and possible market distortion.

The scorecard’s main weakness is the absence of quantified ranges or scenario analysis. The IA reports that the Government has spent £504 million under SISMA, equivalent to £40m per month, that expenditure is expected to continue under the preferred option alongside additional costs, but it does not provide indicative ranges for future support, compensation, capital investment or liabilities. The IA is right not to create false precision, but should still use available evidence to present plausible scenarios or break-even analysis.

Part B

The IA provides a reasonable qualitative assessment of wider government priorities. The IA recognises that the intervention could support the business environment by maintaining steel supply and preserving industrial capability, while also creating risks to investment incentives and expectations of future support. It recognises uncertain trade and investment effects and gives a balanced account of decarbonisation: public ownership may support transition to lower-emission technologies, but continued support could also prolong higher-emission production if transition does not proceed quickly.

Monitoring and evaluation

The IA identifies relevant evaluation questions, key performance indicators and data sources, and explains that monitoring the statutory instruments will inform the wider post-implementation review of the Act. This is proportionate, given the instruments are the mechanism through which the Act’s powers are exercised. Evaluation questions include whether the intervention has enabled steel production to be maintained, supported defence and critical national infrastructure, affected regional and national economic outcomes, and generated unintended consequences. Key performance indicators, include production capacity, financial performance, sector resilience, investment, employment and carbon intensity.

The plan should be more operational. It should explain how evidence will be collected from workers, suppliers, customers, industry bodies and local stakeholders. The IA should set out how the Department will monitor market behaviour, investor sentiment and environmental performance, including carbon intensity per tonne of liquid steel. The IA would benefit from clearer articulation of the conditions under which continued intervention would no longer align with public interest objectives such as value for money.

Regulatory Policy Committee

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[1] The RPC opinion rating is based only on the robustness of the rationale, options identification (including SaMBA) and justification for preferred way forward, as set out in the Better Regulation Framework guidance. RPC ratings are fit for purpose or not fit for purpose.

[2] The RPC quality ratings are used to indicate the quality and robustness of the evidence used to support different analytical areas. The definitions of the RPC quality ratings can be accessed here.