British Steel is set to be brought into public ownership, the prime minister has announced.

Sir Keir Starmer said legislation would be brought forward this week to give the government powers to take "full ownership of British Steel", subject to a public interest test.

The move comes after the government seized control of British Steel's Scunthorpe steelworks from its Chinese owners Jingye in April last year in order to halt the potential closure of its blast furnaces.

Sir Keir said the government had held talks with Jingye, but that a "commercial sale has not been possible, and now a public test could be met".

"Public ownership is in the public interest", the prime minister said in a speech aiming to see off a leadership challenge following Labour's poor election results.

He said he would prove his "doubters" wrong and that for the British people, "change cannot come quickly enough".

The steelmaking industry welcomed the announcement. Gareth Stace, director-general of industry body UK Steel, said it provided "vital certainty" for the 2,700 workforce and the company's customers.

"Maintaining domestic production capability for British Steel's products is essential not only for economic growth but also for our national security and resilience," he said.

However, Stace said nationalisation was "not an end goal", and the process must be the "beginning of a clear and credible long-term plan for British Steel" along with an investment strategy.

Until now, the government had stopped short of taking British Steel back into full public ownership as it looked for potential private investors for the plant.

It seized control of the steelworks in April last year after talks with owners Jingye collapsed amid accusations the Chinese firm was planning to switch the furnaces off.

If the furnaces had been starved of fuel and gone out, the UK would no longer have had the capability to produce so-called virgin steel, due to the process of restarting them being extremely difficult and costly.

Virgin steel-making involves iron being extracted from its original source to be purified and treated to make all types of steel used in major construction projects, such as new buildings and railways.

The public interest test required for the government to take full ownership of British Steel will consider factors such as national security, maintaining critical national infrastructure and supporting the economy.

Jingye claimed the Scunthorpe site was losing £700,000 a day and was no longer financially sustainable, ahead of the government stepping in last year. The BBC understands that the government is spending about £1m a day to keep the loss-making company going.

In March, the National Audit Office revealed the current government supervision regime had cost some £377m in order to fund operations, workers and buying raw materials at Scunthorpe.

The NAO, which monitors government spending, said in March that if such spending was to continue at current rates, it could exceed £1.5bn in 2028 "depending on policy choices that may be taken in the future".

A precise figure of how much full nationalisation of British Steel could cost has not been announced and it is understood that following legislation an independent valuation would be carried out of the business, to see what, if any, compensation might be due to Jingye.

This is not the first time the government has taken over British Steel, with the Insolvency Service running the company for nine months after it collapsed in 2019, at a cost of £600m.

In a joint statement, the general secretary of the Community union, Roy Rickhuss, and Unite union general secretary Sharon Graham said they "fully support" the decision to nationalise.

"British Steel has a bright future, with a world class highly skilled workforce making strategically important steels for the UK's rail and infrastructure," they said.

"The government must also take actions to ensure that all government-funded projects use UK steel."

Charlotte Brumpton-Childs, national secretary of the GMB Union, said it was "right the government does everything in its power to secure its long term future".