A CABINET rift over whether to bailout steelmaking has emerged ahead of this month’s Budget, The Sun has been told. 

Business Secretary Jonathan Reynolds is understood to be lobbying Chancellor Rachel Reeves for a package supporting the country’s last blast furnace site in Scunthorpe. 

Chinese-owned British Steel has announced plans to replace the blast furnace with greener electric furnaces. 

But the Scunthorpe site risks closing before the transition to more eco-friendly production, threatening thousands of jobs and forcing the UK to rely on overseas imports. 

Insiders warned this would leave Britain’s steel supply at the mercy of foreign states, which has national security implications given its place in core infrastructure and defence. 

Before the summer election, British Steel had sought a £600million government rescue deal to keep the blast furnace going during the transition. 

Sources close to the negotiations say that while Mr Reynolds is “on board”, the Treasury is yet to sign off because of the dire state of the public finances requiring “tough choices”.

They said: “We are now seriously facing the end of steelmaking in Britain under a Labour government.”

A Government spokesperson said: “This government will simply not allow the end of steel making in the UK. That’s why we’ve committed to £2.5 billion of investment to rebuild the UK steel industry and support communities now and for generations to come.

“We’re working across government in partnership with trade unions and businesses, to secure a green steel transition that’s right for the workforce and safeguards the future of the steel industry in Britain.”

Insiders also suggested the previous Tory government had been poised to agree to the half-billion-pound deal. 

British Steel’s owners – the Beijing-based Jingye Group – are set to build two new electric arc furnaces, one in Scunthorpe and the other in Teesside. 

Steelmaking is central to Scunthorpe’s community, with 4,500 people employed at the plant that has stood for around 150 years.