Could march of the car-makers save Britain’s steel industry?
TWO iconic British industries are suffering dramatically different fates. As British steel stumbles into crisis with thousands of jobs at risk, Britain’s car factories are booming.
A lack of investment and the heavy burden of environmental and business taxes are holding steel-makers back, insiders says. But they argue that changes to Government policies and big investment in the technology required to make the quality of steel needed for cars could help British steel-makers ride the British automotive boom.
Car sales and the number of vehicles leaving British factories are nearing record levels. The number of cars made in the UK has risen every year since 1999, when the figure stood at just under 1million. Today Britain produces 1.6million vehicles a year and that figure is forecast to leap to 2million by 2020.
But while 1.6million tons of British steel is used by the car industry each year it accounts for just 17 per cent of total UK steel production and industry insiders say steel-makers need to invest in higher quality steel if they want to sell more to the booming motor factories.
‘There are really advanced types of steel which you can do amazing things with, such as make it as sharp as a knife-point, or curve it a certain way for newer cars,’ said an insider. ‘You just can’t get everything you need from domestic suppliers so you have to go to suppliers from Spain, Germany or Poland.’
British steel-makers have suffered not just from cheap Chinese imports dumped in the UK, but from high energy levies and high business rates. One insider said: ‘If the Government helped with those two latter issues, then British steel could invest in producing the higher grades of steel we need but can’t currently source from the UK.
‘The industry is very energy-intensive and UK business rates are out of kilter with the rest of Europe.’
The amount of British steel used by each manufacturer varies. Vauxhall, for example, told The Mail on Sunday that 50 per cent of the steel it uses at its Ellesmere Port plant in Cheshire to produce the Astra is from Port Talbot, while 40 per cent of the steel in its Vivaro van is also from the South Wales works.
‘We’re one of the biggest users of British steel,’ said a Vauxhall source. ‘We’ve really focused on sourcing our steel from the UK, and it’s not just the steel but the expertise from Tata which has been crucial for us. Using steel, particularly in today’s ultra-modern cars, is a very complex process and Tata Steel’s technical know-how has been a vital part.’
But Jaguar Land Rover, which is itself owned by Tata, refused to say how much of its steel came from the UK. It said it had agreements in place with Tata Steel, but a spokesman emphasised that it is separate from other firms owned by the Indian conglomerate and makes decisions for ‘the right commercial reasons’.
Japanese car-maker Nissan produces the Qashqai, Leaf, Juke and Infiniti Q30 at its Sunderland plant, and almost half the steel used comes from Port Talbot. Nissan said: ‘Raw materials and parts are sourced for all Renault-Nissan plants in Europe through our Alliance purchasing organisation. This year about 45 per cent of the steel required for production in Nissan Sunderland Plant is sourced from Port Talbot, and the rest from mainland Europe.’
BMW-owned Mini said it used British steel in its UK-made cars but would not specify how much, while Honda, which has a plant in Swindon where it produces 600 cars a day, also declined to say how much steel was domestically-produced.
Mike Hawes, head of the Society of Motor Manufacturers and Traders, said: ‘Cost, quality and logistics are key to the efficient sourcing of materials and components by UK manufacturers. Though the automotive supply chain in the UK is undergoing a resurgence, more work is needed to support and develop provision of local content. It’s a focus of both Government and industry through the Automotive Council.’
For steel, the Continent represents a competitor. For cars it offers a chance for even more growth. While the appetite of British car-buyers is at record levels – March saw 518,707 new cars registered with ‘16’ plates, the second-highest monthly figure since 1997 – Continental demand is growing even faster. There sales are rising 10.1 per cent a year compared with the UK’s 5.1 per cent. And almost 80 per cent of cars made in the UK are for export, with nearly 60 per cent of them sold on the Continent and 27 per cent in the US.
‘British demand is levelling off,’ said a car industry source. ‘But we are seeing green shoots of recovery in Europe. British-based manufacturers such as Nissan and Toyota export a huge amount across the Channel and British-made cars have huge popularity across the world. What kind of effect would growth in Europe have on British steel?’
Thousands of steelworkers will be looking to a sale of Tata Steel as their immediate hope for keeping their jobs. But in the long run British steel’s best hope may be to ride on the running boards of the UK automotive industry.