We need a new deal for steel
THE coming year is critical to the fate of Britain’s steel industry but for the first time in a long time, there is a glimmer of optimism.
Steel constituencies including Scunthorpe and Redcar turned from red to blue in the election and if any Prime Minister has an incentive to revive the struggling sector, it is Boris Johnson.
No-one should underestimate the depth of the crisis for Britain’s steelmakers. It’s only January but already Liberty Steel has said it is cutting up to 350 jobs in Yorkshire and South Wales and the chairman of India’s Tata Sons says he is not prepared to carry on shouldering losses at Port Talbot.
Rescue talks are under way with a Chinese buyer, Jingye, for British Steel at Scunthorpe. These are expected to conclude next month, though it is not a certainty a deal will be done.
Previous governments have tended to view steel as a sunset industry not worth supporting. This is categorically not true. Even now, as a remnant of what it was in the 1970s, it employs more than 52,000 people directly and in the supply chain. It provides high-quality, well-paid jobs, most of them in hard-up areas.
That in itself might not be a good enough argument, if steel in this country were no longer financially viable and if backing it would result in throwing good money after bad. But the idea we cannot compete on world steel markets is a myth. We can still be a player in the high added value market and in rebar steel for reinforcing structures. Far better, and greener, that we produce our own steel for all the infrastructure projects being planned than import it.
The industry in this country has suffered from decades of terrible ownership coupled with political disdain.
Private equity, like the financiers at Greybull who briefly owned the Scunthorpe British Steel business, is the wrong model.
The Jingye deal is welcome in that it will save jobs and bring new investment, at least in the short term. But the Chinese will have acquired valuable know-how and gained access to a skilled workforce at a rock-bottom price.
In any event, a Jingye takeover will not of itself be enough. The lack of government backing has put UK steelmakers at a grave disadvantage.
They are crippled by green taxes and by industrial energy prices that dwarf those in any major EU country. In 2019/20, UK steel plants paid 62pc more than those in Germany and 80pc more than the French. This needs to be fixed, fast.
And here’s a little known fact: business rates are a scourge for steelmakers as well as for shops. The more improvements manufacturers make to their plants, the more they have to pay. Madness is the only word for it.
The Government could do much more to support the industry through procurement. It should commit to using British steel in its infrastructure projects wherever possible and encourage others to do so.
The steel industry has been asking for these kinds of measures for years but the hope is that Boris, finally, is listening.
It’s intriguing that Ben Houchen, the Tees Valley Mayor and a rising Conservative Party star, is pledging to bring steelmaking back to Teesside in his pitch to be reelected in May. Scepticism is in order, as he’s not saying how he plans to do it. Even so, it is significant he has made the promise at all. Until recently, reviving Teesside steel would have seemed an impossible dream to even the most Panglossian of politicians.
A comeback for steel might still seem improbable but it happened with British car manufacturing, which is not looking too clever now but staged a renaissance after its near-death experience in the 1970s.
The steel industry could, and should, be saved!