EUROSCOPE. The imminent demise of British steel

Richard Coombs has worked at Tata Steel’s Llanwern steel works in south Wales for 23 years, and been through ups and downs, but says he’s never seen things as bad as they are now in the industry. He’s witnessed employment — at Llanwern and beyond — plummet over the years, and his town Newport reduced to a “ghost town,” as new industries failed to fully take the place of the once thriving steel sector. The outlook for Llanwern, where he works, is uncertain, with part of the works mothballed in August, as part of a cost cutting programme. “Its now on its last legs,” he says of the industry. “It’s a fight to the death.”

Coombs was one of the around 30 steel workers who headed to Westminster this week to lobby British parliamentarians ahead of a House of Commons debate on steel industry. The industry is facing a crisis of unprecedented levels.

A sector that employs around 30,000 has lost over 3,000 jobs this year, with nearly two thousand more at risk. While SSI Redcar has shut down, parts of Lord Swraj Paul’s Caparo Industries have gone into administration, Tata Steel has shed jobs and mothballed sites, and the Klesch Group pulled out of buying Tata’s long products division citing hostile conditions in the UK.

Coombs’ anger is palpable — not against the company but over the attitude of Britain’s Conservative government, which he and other workers believe has let the industry down. This sense was strengthened in the past couple of weeks, he says, following the visit of the Chinese President Xi Jinping, and the British government’s failure to seriously tackle the issue of the dumping of Chinese steel at below cost prices on the European market.

From being a net importer of steel, China is estimated to have released 340 million tonnes of steel onto the global market this year, larger than combined US and UK output. “It really feels like they are siding with the Chinese, rather than us,” he says.

While some of the criticism has been directed at Europe — anti dumping levies have to go through the Commission, which has been slower and less effective at introducing them across product categories than the US — much is directed at Britain. It is only recently that Britain has begun voting in favour of the levies (compared to its previous practice, which was just to abstain, and even vote against levies), but it has not been consistent. In fact, in the recent case of the anti-dumping levy brought in for grade-orientated electrical steel, Britain actually voted against the levy.

Another major issue is the failure by the government to speedily introduce a long-awaited compensation scheme for the energy intensive industry. It has pledged to compensate industry for the additional costs it has borne as a result of green energy taxes brought in by the UK government in recent years (notably the Carbon Price Floor), and which are not born by competitors in other European nations.

Despite being announced several years ago, the compensation package is set to be introduced in April, with critics arguing that the government has failed to swiftly push the necessary and simple approvals through the EU. The MPs have also questioned why the government had not taken action similar to other European countries such as Germany, which had brought in the support measures, and retrospectively got approval from the European Commission.

There are other issues too: ‘business rates’, a form of non-residential property tax, are far higher than in the rest of Europe. Bizarrely, it penalises companies for making capital investments. During a parliamentary debate earlier this year, one MP pointed to the example of Tata Steel, which after investing £185 million in a new blast furnace in Port Talbot faced a rise in business rates of £400,000 a year.

Industry is also pushing for the government to adopt a more proactive policy when it comes to public sector contracts, and the use of British steel.

For Tom Blenkinsop, the MP who heads the all party parliamentary group on steel and is a prominent campaigner for the industry, failure to do so, so far (this week the Ministry of Defence courted controversy over two contracts that were awarded and will use Swedish steel), points to a more fundamental problem — the lack of a comprehensive industrial policy, which would include the recognition of the steel sector as national assets, and greater dialogue between the public sector and steel providers about the future needs for infrastructure, to enable industry to adapt as needed.

To date the industry has proved adaptive and innovative — Tata Steel for example has focused on high value added product for niche industries such as the automotive sector, and the increasing demand for lightweight, greener products.

“Britain’s approach to the steel industry is treating it like a corner shop, and assumes the market will replace it with something,” Blenkinsop told BusinessLine .

He believes there is a fundamental contradiction between the non-interventionist ideological commitment of the Conservatives, and the industry’s urgent needs. “We have had the government concede ground to the market, which isn’t a free market — it’s lopsided and heavily subsidised in the case of the Chinese market.”

Roy Rickhuss, head of Community, one of the major steel unions representing steel workers, remains cautious despite recent government assurances that it will take action, and the recent steel summit in the northern city of Rotherham, following which the government set up three task forces.

“I’m confident the government have got the message and understand the challenges we are facing but we need to make sure they follow that through with action,” he told BusinessLine .

Not all problems are down to government of course: Gareth Stace, head of industry body UK Steel, notes that the import of Chinese rebar has been a particular problem for the British market rather than others such as Germany, (In Britain the import of rebar has gone from zero per cent of the market in 2013 to 37 per cent last year) and believes its to do with the specific standards set by individual countries. “There is a separate issue about the robustness of our standards,” he said.

One thing is clear: time is not on their hands. Speaking at a parliamentary committee hearing earlier this week, both Tata Steel’s human resources director Tor Farquhar, and Stace warned that the government had weeks, not months to act to prevent further job losses and an escalation of the crisis.

“The steel sector is a capital intensive industry and therefore hanging in there is a very difficult thing,” Stace says. “What we’ve seen in the sector has been shocking to us even within the sector,”

In all of this, Rickhuss, stresses that concern for the welfare and future of his workers should remain at the heart of the debate. “Of course, we want to support businesses to create sustainable secure situation, but there are people issues here, and sometimes people issues get lost in the business agenda.”

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