The move is the latest in a series of measures Britain has taken to support its steel industry, including a new set of tariffs and quotas to protect the sector from the dumping of cheap steel, and a tariff deal with the United States.
The government said it was bringing British Steel into public ownership in the national interest, to preserve the country's ability to make steel domestically.
"Today's decision secures the future of steelmaking in the UK, protects skilled jobs and safeguards a vital national capability," outgoing Prime Minister Keir Starmer said on Thursday.
The government seized operational control of British Steel from its Chinese owners, Jingye, in April 2025 to prevent the closure of the steelworks in Scunthorpe in northern England and protect 2700 jobs at the plant, as well as thousands more in the supply chain.
The plant, the country's last remaining primary steelmaking site, supplies the rail, construction, and automotive industries.
But in recent years it has struggled with high energy costs in Britain and a glut of steel in the global market, and business minister Peter Kyle told Times Radio the government was spending over a million pounds a day to keep it running.
"We need that virgin steel production because if this were to disappear, we would become at the mercy of international markets and supply from other countries," he said.
Estimating that the government had already spent Stg640 million ($A914 million) to keep the plant open, Kyle said: "It is value for money for the British public, but we need to make sure that this business moves forward."
Legislation to allow the government to take ownership of British Steel received final approval on Wednesday after the state failed to find a buyer for the company, which was privatised under Margaret Thatcher in 1988.
Industry group UK Steel said nationalisation was the right move, and the sector now needed "a long-term plan that restores British Steel to commercial sustainability".
