The Ministry of Defence has been accused of buying standard steel from China that could be sourced in the United Kingdom, in evidence to the Treasury Committee on 3 June 2026.
The criticism was made at a Treasury Committee evidence session on defence spending and finance, which questioned three experts on how the UK funds its defence capabilities and on the dynamics between the Whitehall departments that sign off defence spending. Giving evidence alongside Lucia Retter, Assistant Director for Defence and Security at RAND Europe, and Max Warner, a senior research economist at the Institute for Fiscal Studies, was Andrew Kinniburgh, Director-General of Make UK Defence, which represents just under 1,000 defence companies.
Kinniburgh singled out the Defence Infrastructure Organisation, the body responsible for the defence estate, telling MPs it was still buying steel from China that he said British producers make. “We’re very critical of the MOD, particularly the Defence Infrastructure Organisation, because they are still spot buying pretty, pretty standard steels that we make in the UK,” he said. “They’re spot buying from China, which I find, you know, unacceptable. We should be buying British steel for that.”
He stressed he was not arguing for dumped Chinese steel to be bought up, noting that there are hundreds of types of steel and the UK makes only a relatively small number of them. His objection was to the purchase from China of standard grades that British mills already supply.
The criticism came as Kinniburgh raised concerns about the effect on defence of a 50 per cent tariff on certain steel imports, due to take effect on 1 July. He said the measure was likely to raise the cost of procuring equipment, warning that the volumes exempted from the tariff looked too low for the sector’s needs.
By way of illustration, he said the steel stockholder Barrett Steel bought around 4,000 tonnes of one specialist steel each year, much of it for the defence market, while the entire UK tariff-free allowance for that steel was, as he understood it, 1,000 tonnes.
Asked what Make UK’s position on the tariff was, Kinniburgh said the answer was to negotiate a practical solution rather than to delay or abandon the measure, noting that UK Steel is part of the wider Make UK organisation and that the two were working together on the issue.
What’s the price difference?
Pay for the British steel and, if more expensive, count the difference within the 1.5% ‘defence related’ requirement.
When SHTF we’ll be sorry that we’ve been propping up the Chinese steel industry instead of supporting our own, all for a few £ savings here and there.
Don’t disagree at all 🙂 was just curious
British Steel is significantly more expensive than Chinese steel, which is very well know. In the end, this awful government is just adding unnecessary cost leading to the acquisition of fewer assets. Another terrible decision by a clueless government.
The UK needs to build a Finex steelmaking plant (Austrian, S Korean technology). Not net zero, but a lot cleaner than conventional steelmaking. Cheaper too.
But, but bar charts from Ed Militwat won’t allow for such CO2 emissions.
If you make a law that says you have to buy British steel when available then they can charge what they like assuming there’s only one supplier. You could also just change the steel grade very slightly to one that the UK doesn’t make so you can get the better price from abroad.
Really all you can do is some kind of tariff, or subsidise local steel.
My understanding is defence steel usage is minimal compared to construction and car manufacturing though.
Submitten,
Yes car manufacturers need vast amounts of standard high-strength steel, defence requires highly extreme, niche metallurgic properties. Submarines need specialised steel capable of withstanding the crushing depths of the Atlantic, armored vehicles require ballistic-grade armor plating that can shatter an incoming anti-tank missile.
Because these military steels are so highly specialised, the UK market for them is tiny. A stockholder like Barrett Steel might only buy 4,000 tonnes of a specific defence-grade steel a year. Because the volume is so small, commercial British mills can’t afford to run their massive furnaces just to make a tiny batch, as a result, the UK defense supply chain is forced to import it from allies; like Sweden or France.
Thus back to Kinniburgh’s anger at the Defence Infrastructure Organisation (DIO). While the MoD has to import highly specialised steel for a stealth fighter jet or a nuclear reactor vessel, the DIO is buying steel to build military barracks, hangars, and fences. That infrastructure steel is standard construction-grade steel, the exact stuff British mills make in … ABUNDANCE.
When the government allows the DIO to buy cheap, state-subsidised Chinese construction steel on the spot market instead of supporting British foundries, it starves the very mills the UK relies on to keep its broader industrial base alive. Defence steel usage is visually invisible compared to the gargantuan tonnage used to build cars and warehouses. But national security does not run on volume; it runs on “critical dependency”. If the UK allows its commercial steel industry to collapse because it cannot compete with China on standard construction steel, the highly specialised, low-volume defence steel capabilities will die right along with it, leaving the UK entirely dependent on foreign nations to build its frontline warships and armored vehicles.
Thanks that’s a really good reply. So I wonder how much the government could define in their contracts. Defence is one thing, but infrastructure is a construction matter that goes to private companies that already have supply contracts.
Not easy for anyone really. I wonder if other countries have to do it?
Excellent. Steel from China, oil from Russia. A really well thought out defence straegy.
The system does what it is designed to do.
Buy British in this case. Doubly so since UK is going to be hit by ( snti-China) steel tarriffs soon. Mind you hoping we do it back to the EU too ( and China).
That chinese steel very likely is russian steel under chinese invoices cover.
Well, you know who your Alloys are.
Given up with British steel. There always an excuse not to buy it so why bother trying to convince people to buy British when there is no appetite to do so. Seems the people in power know what’s best!
My friend worked in a steel stockholders, there was a lot of waste with Chinese steel plate due to distortion when cutting to size.
It’s understandable to look at this tangled web of contradictions, spot-buying Chinese steel while trying to pass protectionist tariffs, or wanting a British supply chain but failing to fund it … and conclude that the government is simply incompetent … that’s how I feel.
Yet I understand that the UK government is trapped in a multi-departmental civil war where different arms of the state are legally mandated to fight against each other. What looks like stupidity from the outside is actually the result of three deeply embedded, conflicting structural mechanics within Whitehall.
The fundamental flaw in British governance is that Value for Money (VfM) is defined almost entirely by the lowest upfront cost on a spreadsheet, a standard rigidly policed by HM Treasury. It causes a “Steel Paradox”, the Defence Infrastructure Organisation (DIO) is given a strict budget to upgrade barracks or naval bases. Under Treasury rules, if a civil servant chooses to buy British steel that costs 10% more than Chinese spot-market steel, they can be penalised for … “wasting taxpayer money.”
The result, a system that explicitly rewards the civil servant for buying from China because it saves the department money today, completely ignoring the long-term strategic catastrophe of bankrupting the UK’s own steel mills. Departmental silos cause left hand vs the right hand clashes. Whitehall departments operate like completely separate corporate kingdoms, rarely aligning their strategic goals.
This disconnect plays out directly across three players.
The Department for Business and Trade (DBT) whose strategic goal is to protect domestic industries and prevent foreign dumping. They implemented the 50% steel tariff coming on 1 July 2026 to shield local producers.
The MoD and the DIO, their strategic goal is to build military infrastructure as cheaply and quickly as possible. They spot-buy cheap Chinese steel to meet immediate build deadlines, bypassing British mills entirely.
Then we have HM Treasury, whose strategic goal is to control public spending and limit departmental budgets, they refuse to subsidise the cost difference for buying British, forcing the MoD to look for the cheapest possible source.
Because the Department for Business and Trade didn’t accurately coordinate with the MoD’s actual supply-chain needs, they designed a blanket tariff quota e.g., the 1,000-tonne limit Kinniburgh mentioned, that accidentally penalises the very British defence stockholders; like Barrett Steel trying to build British equipment. It is a case of a policy designed in a vacuum.
Civil servants are terrified of project delays and cost overruns. If an independent mid-tier British firm is handed a contract to develop a complex solution from scratch, there is a risk it might face delays. If a civil servant buys a completed, turn-key product from a massive international multinational, the risk is outsourced … The civil servant is “safe” as the system values administrative safety over sovereign capability. It is always safer for a bureaucrat’s career to buy a foreign product that is “ready to go” than to take a risk on nurturing a domestic innovator.
Can doing the “right thing” by and for the UK as a whole actually be fixed? The new paradigms being built into the upcoming DIP are the first genuine attempt to break this cycle, but they face a massive hurdle … Treasury’s veto power.
To truly fix this and stop looking “incompetent,” (as I see the fsckers) the UK government has to change the math of procurement. They must transition to a system where sovereign resilience and domestic economic growth are heavily weighted factors in a contract bid. Until a civil servant is legally allowed to say, “I am choosing the British option because keeping this factory open in Sheffield is worth more to the UK economy than saving £5 million by buying from a state-subsidised factory in China,” … the system will continue to churn out these baffling, self-defeating decisions.
The SDR and the impending DIP represent the first massive structural overhaul of British defence in a generation. Starmer’s explicitly stated goal is to build a system where military strategy and industrial growth are treated as the same thing.
However, the “better system” has and is currently undergoing a brutal, real-time trial by fire in Whitehall. The ongoing transition reveals where the government is succeeding in breaking the mould, and where the old Treasury gravity is pulling back.
The government is actively trying to end the era of “hollowing out” the military via three structural changes. Starmer and Defence Secretary John Healey have LEGALLY locked in a mandate that forces the MoD to treat domestic economic resilience as a primary requirement. This is why the SDR includes investments like £1.5 billion for “always-on” sovereign munitions factories and a £400 million UK Defence Innovation fund to protect mid-tiers from being bypassed for foreign options.
The appointment of a National Armaments Director (NAD), instead of civil servants running procurement like a standard corporate purchasing department, the new NAD has been given overarching power to dictate what the services buy. The NAD’s explicit job is to cut through the bureaucratic red tape of Defence Equipment and Support (DE&S) and ensure small British tech companies can get contracts signed in weeks, not years.
The 2.6% GDP commitment; the Prime Minister recently confirmed a concrete step up to a 2.6% GDP defence spending target, injecting billions into the budget specifically to finance the technological modernisation, such as … mass drone swarms and automated naval systems, demanded by the SDR. While Starmer seems to be trying to do the ‘right thing,’ the civil war between the MoD and the Treasury has not disappeared, it has simply evolved. The severe delays plaguing the publication of the 10 year DIP are the direct result of a …MASSIVE, CLOSED DOOR CABINET BATTLE. The MoD and military chiefs have argued that to actually achieve the “war fighting readiness” demanded by the global threat landscape, the Treasury must fully fund a massive backlog of underfunded programs.
Yet, Treasury’s Chancellor Rachel Reeves is aggressively policing fiscal realism, demanding strict cost controls, a prime example being the GCAP stealth fighter jet. To prevent future cost overruns, the Treasury is moving to SEIZE DIRECT FINANCIAL CONTROL of the multi-billion-pound fighter project away from the MoD entirely.
The Treasury’s justification is the MoD’s historical track record of letting projects spiral out of budget. They want to classify these massive military programs as “mega-projects” overseen by a cross-government board, effectively keeping the MoD on a very short financial leash. Labour has successfully diagnosed the illness. They have accepted that the old system, where the MoD spot-bought cheap foreign tech and the Treasury starved domestic R&D, was a strategic failure. They have put the correct legal frameworks, targets, and innovation pipelines in place to fix it.
However, (there is always a but 🙂 a framework is only as good as the cash behind it. The ultimate test of whether this “better system” will rule the day will occur when the DIP is officially published.
If the finalised DIP contains the long-term, un-watered-down 10-year funding commitments that British defence manufacturers need to build factories and hire apprentices, Starmer will have successfully reformed the state. But if the Treasury forces deep cuts to planned military programs to balance the broader UK ledger, the new paradigm risks becoming another historically underdelivered defence review.
The Treasury’s decision to intervene is driven by what senior Whitehall figures have openly described as the MoD’s “delinquent” attitude toward taxpayer money and value for money. To justify seizing control, the Treasury has pointed directly to the MoD’s dismal track record of massive cost overruns and delays on major procurement lines, such as the Ajax armoured vehicle fiasco and severe delays to the nuclear submarine fleet.
Given that GCAP is incredibly complex, features spiralling internal cost projections, and involves intricate international treaty obligations with Italy and Japan, Treasury argued that leaving the financial keys solely in the MoD’s hands was too high a risk.
Treasury is not simply sending accountants to audit the MoD; they are structurally stripping away their autonomy over the jet. The plan utilises a specific bureaucratic mechanism to seize control. GCAP is being designated as an official government “Mega-Project”, elevating it to the same cross-government status as HS2 or the Dreadnought nuclear submarine fleet. Instead of reporting only to military chiefs, spending and milestones will be strictly overseen by a centralised, cross-government governance board.
The project will be managed with direct intervention and enhanced support from the National Infrastructure and Service Transformation Authority, an aggressive oversight agency that answers directly to Treasury and the Cabinet Office. The financial takeover was the literal “price of admission” for the MoD to secure the cash it desperately needed.
… During the frantic negotiations over the DIP, Defence Secretary John Healey and military chiefs insisted they needed a minimum of £18 billion to prevent the complete collapse of their plans, while Chancellor Rachel Reeves attempted to cap it at £12 billion. The Prime Minister ultimately enforced a £15 billion compromise settlement up to 2030, which includes locking in an extra £6 billion specifically to rescue GCAP.
it’s reported that Rachel Reeves only agreed to release that massive multi-billion-pound injection on the condition that the Treasury holds the chequebook. So it seems that the Starmer government is attempting to build a more resilient defence system, but Treasury fundamentally does not trust the MoD’s procurement culture. So, seizing direct, unprecedented financial control over the future of the RAF’s flagship fighter jet is the exact structural hammer they are using to enforce fiscal discipline.
It’s all very brutal! … one wonders how GCAP as a fighter will suffer from / by treasury interference, I think that the fact that Italy and Japan are equal partners is the single most powerful counterweight against HM Treasury’s worst impulses. When Keir Starmer, Sanae Takaichi, and Giorgia Meloni’s government locked in the GCAP International Government Organisation treaty, they didn’t just write a memorandum of understanding; they created an international legal framework.
If Rachel Reeves’ Treasury unilaterally slashed the UK’s core funding or forced a massive design downgrade to save money, it wouldn’t just be an internal Whitehall dispute. It would be a monumental breach of an international treaty with G7 allies. For a government trying to re-establish the UK as a reliable, rock-solid international partner, alienating Rome and utterly humiliating Tokyo is a diplomatic price the Prime Minister refuses to pay. The leverage is incredibly real. When rumors leaked that the UK’s DIP might delay funding, it sparked immediate alarm in Tokyo. The Japanese leadership put GCAP at the absolute top of the agenda for bilateral talks with Starmer. The PM had to personally reassure Japan that the UK remains completely committed … overriding the Treasury’s initial desire to cap the budget.
Italy and Japan are pulling their weight. Italy’s parliament recently approved an updated, massive €18.6 billion commitment for their early phases of the program to absorb rising technology costs. With Japan and Italy laying down massive cash, the UK Treasury cannot easily turn up to the table with “stupid requests” without looking like the weak link in the alliance. However (more ‘buts’), while Treasury cannot cancel GCAP because of Japan and Italy, they are still managing to interfere via a classic bureaucratic tactic … back-loading. The compromise Starmer enforced locked in an extra £6 billion specifically to rescue GCAP and secure the next phase of contracts. Treasury fought back by ensuring that the bulk of this UK funding will only be released toward the mid-to-late 2030s.
This cash starvation in the immediate five-year window is what has defence insiders and former ministers warning that the initial 2035 target deployment date is highly likely to slip into the late 2030s. Treasury didn’t kill the project, but their tight grip on the chequebook is slowing its momentum, which frustrates international partners who need the aircraft on time to counter escalating global threats.