China’s Jingye Steel has triggered a formal consultation under a bilateral investment treaty to demand compensation from the UK government. The dispute over the Scunthorpe steelworks could strain UK-China relations.

Jingye plans to recover 711 million pounds in debts owed by British Steel, though industry insiders said the company seeks more than 1 billion pounds.

This legal move provides leverage after a year of failed payout talks. The UK government took control of the plant last April on national security grounds and to prevent 2,700 job losses, with Prime Minister Keir Starmer later announcing full nationalization.

Jingye bought the struggling company in 2020. If unresolved in six months, an international arbitrator will decide the dispute. Meanwhile, new UK import tariffs could make the business attractive to future private buyers.