The UK Parliament has passed emergency legislation to enable the government to direct the use of assets of British Steel, and to take control of assets if directions are not followed.

The government’s stated intention is “continuing the support of steel production in the UK [which] involves preserving current production capacity to ensure resilience in the production of steel”. The new law creates new powers for the government to intervene in relation to steelmaking businesses whose assets are at risk of ceasing to be used. If the operation of a steelmaking blast furnace, such as those operated by British Steel, is stopped, restarting its operation can be prohibitively expensive and it may be permanently unusable.

Following negotiations with its current owners (the Chinese steelmaker Jingye Group) on the future of British Steel, the government announced on Friday its intention to recall Parliament the following day to introduce a draft bill and complete the full legislative process within a single day. The bill was passed by both Houses of Parliament and received royal asset on Saturday 12 April, coming into force on the same day, as the Steel Industry (Special Measures) Act 2025 (the “Act”).

This is the first time that Parliament has responded to a perceived crisis in a UK industry by extending the government’s powers to intervene in specific industries for “public interest” reasons since 2008, in the context of the Global Financial Crisis. In that case, Parliament passed legislation to enable the government to nationalise the Northern Rock bank (and subsequently other banks), and later that year the government’s public interest intervention powers under the Enterprise Act 2002 were expanded in order to allow the government to override competition concerns in the Lloyds/HBOS merger. In contrast to previous measures that provide the government with powers to acquire businesses and to intervene in potential mergers and acquisitions between businesses, the new Act applies outside of the context of a transaction or takeover. Specifically, the new Act applies where specific assets may cease (or have ceased) to be used in a steel manufacturing business but the government considers that it is in the public interest that the use of the assets should continue.

New powers to give directions on use of assets and take control of assets

The Act gives the government the power to issue a notice to a steel manufacturing business to direct how assets (in England and Wales) used by this business are to be used. This power is available when (a) it appears to the government that the assets concerned have ceased to be used or are at risk of ceasing to be used by the business, and (b) where the government considers that it is in the public interest that the use of specified assets should resume or continue. Directions can include requirements to use (or not to use) the assets in a specified way, or requirements for the undertaking to take (or not to take) steps to secure the continued and safe use of the assets. Notably this can include requirements to enter into agreements and contracts of employment, the appointment of officers, management decisions, making payments, and preventing insolvency proceedings.

Not only does the Act create offences for corporates and individuals (such as directors and officers), punishable by fines or custodial sentences of up to two years, for failure to comply with these directions without reasonable cause, or preventing or hindering compliance with directions, but it also provides that the government can apply for court injunctions to prevent such offences from taking place, and if certain conditions are met it provides the government with a further power to take control of assets.

If the government considers that a business that has been given a notice has failed to comply with directions, or that there is a risk that a such business may fail to comply or the intent of securing the continued and safe use of the assets might otherwise be frustrated, the government can step in to take control of the assets, and do anything that could be done by any relevant person (such as a director or manager) in relation to the business, including entering the premises, preventing the disposal of the assets, and taking any other action it considers appropriate.

The Act allows the government to recover any expenses incurred in taking control of assets from the business, including its group companies. To ensure compliance with parties’ rights to protection of property (under the European Convention on Human Rights), it also provides a route via further regulations for compensation to be paid to businesses that are subjected to directions under the Act.

Public interest and national security interventions in the UK

The power to issue directions is available where the use of assets in steelmaking has ceased or may cease, and where the government considers that it is in the public interest that the use of specified assets should resume or continue. This focus contrasts with statements made by the Prime Minister the previous day, which refer to “economic and national security” as the justification for the recall of Parliament during the Easter recess and need for emergency legislation to “take control” of assets.

The new Act does not nationalise British Steel or provide a power to purchase the company, and it does not automatically give the government direct control over British Steel or its assets. The powers granted also do not transfer ownership of any assets to the government, although they could be used to direct assets to be transferred, if required to ensure their continued and safe use.

For comparison, the 2008 emergency legislation (and the Banking Act 2009, which replaced it) permitted the government to acquire securities in, or assets of, banks and financial institutions for the purposes of maintaining the stability of the UK financial system and protecting public interests in circumstances where the financial institution has received financial assistance or support from the state.

In several utility and infrastructure industries, a Special Administration Regime (SAR) provides for operational continuity of critical services and infrastructure via an insolvency process for failing businesses where there is a wider public interest that would not be served by ordinary administration proceedings (for example, the 2021 insolvency of Bulb Energy). While these regimes enable public interest objectives to be prioritised, and can enable the government to intervene in, take control of, or nationalise businesses, their application is generally limited to cases where the business is failing or declares insolvency.

Beyond sector-specific legislation, there are two main operational regimes in the UK allowing government intervention in mergers and acquisitions for public interest or national security reasons:

• Under the Enterprise Act 2002, as part of the UK’s competition merger control regime, the government can intervene in mergers between businesses for “public interest” reasons such as maintaining financial stability, media plurality and the freedom of expression of opinion and accuracy of news in the press, and maintaining the capability to combat public health emergencies. The UK government has previously used these powers sparingly outside of acquisitions of news publishers and situations concerning national security (which was formerly part of the regime prior to its removal from the public interest considerations in 2021). Perhaps the most well-known example of an intervention made on a similar emergency basis is the takeover of Lloyds Bank by HBOS following the 2008 financial crisis. Here, the Government intervened to permit the transaction to proceed on public interest grounds, notwithstanding that the competition authority had identified substantive antitrust concerns with the acquisition. However, in the absence of a transaction (a ‘relevant merger situation’) – as is the case with British Steel – the public interest intervention powers are not available.
• The government has wide-ranging powers to intervene in transactions in any industry under the National Security and Investment Act 2021 (“NSIA”) and to issue orders directing parties to do (or not to do) certain actions. However, those powers are only available for acquisitions of certain levels of control (rights or interests concerning certain levels of shares or voting rights or otherwise enabling material influence) over entities or assets (“trigger events”), and a review under the NSIA regime can only be carried out where the government reasonably suspects the trigger event has given rise or may give rise to a risk to national security.

Additionally, the government still holds powers under an older statute, the Industry Act 1975, to intervene to prevent a change of control of an “important manufacturing undertaking” that would be contrary to the interests of the UK.

Government action since passing the new law – and a new approach to Chinese investors?

Since the Act was passed on Saturday, the government has announced the appointment with immediate effect of two new executive officers for British Steel, and that it had secured and settled payment for raw materials to keep the blast furnaces operating for the coming weeks.

In comments made to the press, Jonathan Reynolds, the Business Secretary and government minister charged with exercising the powers under the new Act, stated that he did not consider that the situation and need to take action was the direct result of “foreign influence” from the Chinese state, instead pointing to the corporate owners of the plant, whom he said had “refused to act rationally” in negotiations with the government to keep the plant running, by rejecting offers of support. Reynolds suggested that the Chinese government would understand the reasons for the intervention, framing the action as being necessary to protect “thousands of jobs [and] a crucial sovereign capability”.

In doing so, Reynolds draws a distinction between the government’s assessment of the businesses owners and the Chinese state. However, he further acknowledged that Chinese investors would be subject to higher scrutiny and need to clear a “high trust bar” when investing in key sectors, which he has not delineated. These comments signal a change to how the government has communicated its approach to screening foreign investments under the NSIA regime. The NSIA is in principle neutral with respect to the country of the acquirer, although each transaction is assessed on a case-by-case basis and the specific ‘acquirer risk’ would always be considered. The figures in the government’s latest annual report show that 41% of the acquisitions that were subjected to a call-in notice and review under the NSIA involved a Chinese acquirer – more than any other country. Transactions involving acquirers from other countries are also frequently scrutinized, and remedies can even be imposed for acquirers from countries closely allied to the UK (such as Five-Eyes and EU Member States). Last month, conditions were imposed on a planned merger between an Australian cybersecurity business and a UK technology business supplying the UK government.

In the current geopolitical climate, and with an increasing array of laws and tools for intervention available to governments, businesses and investors from all jurisdictions need to pay close attention to both the legal context and to security, investment and trade policy when making strategic decisions about their operations and investments. In particular, proactive strategic planning for material investments and commercial decisions will become more relevant – particularly in sensitive and economically important industries – corporates and investors navigate increasingly complex potential security and public interest concerns.