Steel industry leaders urge policy reform after £5M Chinese contract at UK site
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A relatively small steel procurement decision at one of Britain’s flagship decarbonisation projects has triggered a larger political and industrial argument about what “net zero investment” is supposed to achieve.
Net Zero Teesside, the high-profile carbon capture and storage development backed by BP and Equinor, has awarded a contract for roughly 7,000 tonnes of structural steel to a Chinese supplier. The deal, worth about £5 million, has been criticised by UK Steel, the trade body representing British steelmakers, which argues the decision undermines the Government’s stated commitment to economic resilience and domestic supply chains.
The controversy lands at an awkward moment for ministers. Net Zero Teesside is positioned as a cornerstone of Britain’s industrial transition, designed not only to reduce emissions but also to anchor jobs and investment in a region with a long history of heavy industry. Yet the decision to source steel from overseas has raised questions about whether public support for net zero infrastructure is delivering meaningful economic value at home.
A flagship project with a local steel industry next door
Net Zero Teesside aims to build a large-scale gas-fired power station paired with carbon capture, utilisation and storage technology, designed to reduce emissions from power generation and industry in the Teesside region. The project has attracted substantial public backing and has been repeatedly cited as evidence of the UK’s ambition to become a leader in carbon capture and storage.
Last summer, Balfour Beatty was appointed as main contractor under an £833 million contract. The overall project is expected to cost about £1.5 billion. In that context, a £5 million steel order may appear marginal. But industry leaders argue that such contracts carry symbolic weight, shaping supply chain decisions for future projects and signalling whether British industry will be included in the net zero build-out.
UK Steel director general Gareth Stace said BP’s decision to buy Chinese steel rather than source it locally “beggars belief”, particularly given that British Steel operates nearby and has the capacity to supply the material. For a taxpayer-supported project, he said, the move was “deeply disappointing” and should not have been allowed to happen.
The dispute is not just about a single procurement package. It is about whether the UK’s net zero spending will reinforce domestic manufacturing or simply finance construction while value flows abroad.
The gap between policy ambition and procurement reality
The Government’s industrial messaging in recent years has increasingly emphasised strategic supply chains, national resilience and the need to support domestic manufacturing. Ministers have also spoken more directly about steel as a strategic asset, particularly amid concerns over energy costs, international competition and the fragility of parts of the UK industrial base.
However, procurement rules across major projects have long prioritised value for money, often defined narrowly as lowest cost. While public bodies and publicly supported projects can take broader economic and social value into account, enforcement can be inconsistent, and requirements to source domestically are often limited by commercial structures, trade commitments and the complexity of contractor-led supply chains.
UK Steel’s criticism centres on that policy gap. The trade body welcomed the Government’s stated commitments but argued they must be applied consistently by sponsors of publicly backed projects. It called for clearer procurement expectations and stronger enforcement so that domestic industrial benefits are realised in practice, not just promised in press statements.
Importantly, UK Steel did not demand that the contract be reversed. Instead, it positioned the decision as evidence that rules and incentives need to change, particularly for projects receiving public support through mechanisms that ultimately fall on consumers and taxpayers.
Why a small contract can become a big issue
The steel package in question covers structural components totalling about 7,000 tonnes. On paper, it represents a small slice of a £1.5 billion project. But the political optics are difficult to ignore. Net Zero Teesside is being sold as a regional economic catalyst, with thousands of jobs expected through construction and long-term operation. Critics argue that if early procurement is already being offshored, the promised supply chain benefits could prove thinner than expected.
The episode also reflects broader anxieties in the UK steel sector. British producers face fluctuating demand, volatile global pricing and pressure from imported material. While there are areas where overseas sourcing is unavoidable, industry figures argue that standard structural steel should be an obvious opportunity for domestic supply, particularly when production capability exists close to the project site.
Stace’s statement drew attention to the Government’s ambition to strengthen domestic supply chains, arguing that sponsors benefiting from public support should be expected to align with that policy in delivery decisions. The implication is that a net zero strategy that fails to include British manufacturing risks losing political legitimacy, particularly in industrial regions where the transition is supposed to create new opportunity.
Strategic steel has already become a political priority
The criticism also comes against a backdrop of renewed state attention to British Steel. At the end of last year, the company secured a £35 million contract to supply rail products for Türkiye’s high-speed rail network. Earlier, concerns that British Steel could collapse prompted Network Rail to stockpile about 60,000 tonnes of rail, enough for roughly a year of operations.
In a further sign of the sector’s strategic importance, the Government passed the Steel Industry (Special Measures) Act at speed, granting powers intended to prevent British Steel’s owners, Jingye, from stopping operations. Network Rail and British Steel later agreed a £500 million contract for the supply of 337,000 tonnes of steel over five years.
These interventions underline how closely steel has become linked to national resilience and critical infrastructure. That makes the Net Zero Teesside procurement decision more than a routine commercial matter. It is now a test case for whether the Government’s industrial narrative can withstand scrutiny at project level.
Net Zero Teesside and BP have been contacted for comment. For now, the dispute remains contained. But the debate it has sparked is likely to grow, as more publicly backed net zero projects move from policy vision to procurement reality.
Sources