Labour told to block Chinese firms from these energy projects after steel crisis

Labour has been urged to phase out Chinese ownership from UK oil, nuclear power and renewable energy infrastructure after claims of attempted “sabotage” at British Steel.

Keir Starmer’s Government is facing growing calls to block investment from Chinese firms in the likes of Grangemouth oil refinery, new nuclear reactors at Hinkley Point C, plus other solar and wind projects.

It comes after Business Secretary Jonathan Reynolds said over the weekend that companies from China may have to be excluded from “sensitive” sectors after the Government stepped in to take control of the Scunthorpe steelworks from Jingye.

Downing Street appeared to try to defuse the simmering row with China on Monday by resisting pressure for a fresh crackdown on Beijing-linked companies in the UK.

Grangemouth oil refinery

But Starmer’s Government is now facing growing calls to go further and nationalise Grangemouth oil refinery – the under-threat plant near Falkirk partly owned by Chinese company PetroChina.

Several Labour MPs told The i Paper that they backed calls by the SNP to take control of the plant in central Scotland to secure its future.

Opposition MPs also called for the Government to block plans by Chinese company Mingyang to build a wind turbine factory in Scotland.

Hinkley Point C nuclear reactors

Experts also said it was time to examine how Chinese firms could be phased out from other major energy projects – including new nuclear reactors at Hinkley Point C.

However, they warned there was a limit on how much could be nationalised – warning that the Government may have to offer incentives to other private sector players to buy out Chinese firms.

Luke de Pulford, executive director of the Inter-Parliamentary Alliance on China, said Labour had been “naïve” and “desperate” in trying to encourage economic investment from Beijing.

“It’s wilful blindness because they know it’s compromising national security,” said the China hawk from IPAC, which brings together international politicians to examine the threats posed by China.

De Pulfold said ministers should do a full “audit” of existing Chinese ownership in key sectors. “We need to be rooting out Chinese investment from our critical infrastructure,” he said.

“It’s not going to be easy. But we need to protect our national security and increase our resilience. We have to accept there might be economic pain, but it’s a case of pain now over more pain later.”

In 2022 the Conservative Government forced China General Nuclear (CGN) out of the Sizewell C nuclear power plant project in Suffolk, using £700m of taxpayer cash.

But CGN still owns a 33 per cent interest in the Hinkley Point C project in Somerset, with the French energy giant EDF owning the rest.

The Government should look at encouraging private companies – whether British or from allied companies – to buy out Chinese firms, De Pulford added.

“There has to be other ways of doing it than going around the country nationalising things all over the place. It’s not sustainable.”

The Chinese state ultimately holds £45 billion in UK assets, according to a 2023 ‘China List’ report in The Sunday Times.

China Investment Corporation (CIC), the country’s sovereign wealth fund, has a 10 per cent stake in London’s Heathrow airport, an 8.7 per cent holding in Thames Water, and is also part of a consortium that owns Cadent – the UK’s largest gas distribution network.

Wind farms in and off the coast of Scotland

There has been increasing Chinese investment in Britain’s renewable sector, primarily in wind and solar.

Offshore wind company Mingyang was recently chosen by a joint Italian-Norwegian-Japanese venture to provide the turbines for the Green Volt North Sea wind farm off the north-east coast of Scotland.

Mingyang are also thought to be in talks to build a turbine plant in Scotland. UK Treasury ministers reportedly overruled concerns from the Ministry of Defence about Mingyang’s involvement in the wind farm.

Labour’s investment minister Poppy Gustafsson met with Mingyang at the end of last year, shortly before Chancellor Rachel Reeves went to Beijing to try to drum up wider investment.

The Conservatives’ Shadow Energy Secretary Andrew Bowie said Chinese involvement should sound “alarm bells” – potentially leaving subsea communications vulnerable to Chinese spying attempts.

Bowie told The i Paper that Labour’s “arbitrary” net zero targets meant they had “no choice but to become more and more reliant” on China, accusing the party of “undermining our energy and national security”.

However, some investment decisions were taken while a Conservative government was in power.

Several left-wing Labour MPs, including Jon Trickett and Andy McDonald, have joined the SNP in calling for the Government to consider taking control of Grangemouth from PetroChina and its partner Ineos.

Scotland’s sole oil refinery is set to close by the end of June. The owners have plans to convert it to an import-only terminal, with around 400 of the 2,000 jobs at the site facing the axe.

A joint Scottish and UK Government project have set out a number of options for the future of the Grangemouth site – including the production of hydrogen and sustainable aviation fuel. However, it said that around £3.5 billion of private investment would be needed.

Brian Leishman, Labour MP for Alloa and Grangemouth, said no foreign power should have control over a “vital” asset like an oil refinery. “I don’t understand why the Government won’t do the same for Grangemouth as it did for Scunthorpe.”

He added: “Private, foreign capital is involved in the ownership in both. Losing refining capacity in Scotland will negatively impact our fuel security and therefore our national security.”

Ewan Gibbs, senior lecturer in economic and social history at Glasgow University, said it was “no bad thing” that the idea of nationalisation in heavy industry was back on the table – arguing that there was a good case for taking control of Grangemouth.

“Regardless of the country of origin, it’s clear we have private foreign ownership in key sectors who are not invested in the interests in the UK national or local economies,” said Gibbs.

“They are not committed to the welfare of workforces and capacity. It’s legitimate to be concerned about [security].”

George Magnus, economist and associate at the China Centre at Oxford University, said there should be a higher bar in allowing Chinese companies to invest in critical sectors.

“It’s reasonable to ask the Government that a rule is run over each company in question, and what the risk to Britain is. It’s naive to think if it’s not a state-run enterprise it will be fine,” he said.

However, Magnus warned that attempts to nationalise or force existing Chinese companies out would be difficult – and could lead to retaliatory action from Beijing when it comes to trade and British companies in China.

“I don’t think China will be very happy if the Government began extricating Chinese companies from nuclear and other sectors. There is still a fair bit of commerce that happens between us.”

The Government has been approached for comment.