UK steel: Stakeholders take stock of post-Brexit future

Vidya Ram London | Updated on February 11, 2018 Published on February 11, 2018

While union members fear a possible collapse, govt promises support and industry seeks a sector-specific deal

By the wind-battered seaside of Redcar, a town on England’s north-east coast, stands the shell of the former steel works of SSI. The Thai firm had bough the plant from Tata Steel in 2011.

The site closed in 2015, dashing hopes of a stable future, with the loss of over 2,200 direct jobs plus more in the supply chain and beyond.

While concerted efforts to regenerate the area have been made, the job losses have had a devastating impact on the local economy, which had been a centre of steelmaking for over 175 years. Many former workers are still struggling to find employment, or forced to take on jobs at knock-down wages.

Since then fears that it wouldn’t be the last steel heartland in Britain to collapse have haunted the industry — not least when Tata Steel UK put all its UK assets up for sale in 2016, prompting a hurried journey to Mumbai by then Business Secretary Sajid Javid.

Later that year, Tata Steel and unions agreed on a deal to keep both blast furnaces open at Port Talbot — the Welsh plant home to its strip steel operations — for at least five years, with a £1-billion investment, in return for changes including the restructuring of the pension scheme.

Its long products division has been sold to Greybull Capital and now operates as British Steel Ltd, while its speciality steels business has been sold to Liberty UK. Earlier this year, Tata Steel struck a deal with UK authorities over its pension arrangements, which it has said is key to a future sustainable industry.

Kick-starting change

While global demand has revived, as have prices, few within the industry remain complacent about the future.

Earlier this week, Community, a union representing Tata Steel workers, hosted a conference that brought together its members, politicians and industry in an effort to kick-start change, and push for the sector deal that the industry has sought from the government.

“The past few years have been the toughest the industry has had to face…thousands of jobs have been lost in our communities…it’s a reminder of what happens when industry is not properly supported,” said the Union’s president Jacqueline Thomas.

“The crisis may have left but there are big challenges ahead,” said Roy Rickhuss, the union’s general secretary.

Rickhuss has led the cross-union ‘Save our Steel’ campaign that, in 2016, saw protests up and down the country, in a drive to put steel at the top of the political agenda.

“The crisis was about short-term emergency measures. And the government did listen but where we are now...we are not in crisis but we are not out of crisis. The steel sector is a global sector cyclically — it will suffer a downturn and we don’t want to be here, in the UK, at the bottom of the crisis as we were in 2015,” said Gareth Stace, director of industry body UK Steel, who submitted an industry-led vision of a steel sector deal to the UK government last September.

The proposed deal included industry pledges for significant new capital investment, including in R&D (focus on value added specialised product is seen as crucial for the industry going forward) in return for further action.

Such deals have been struck with other industries, including Britain’s auto sector.

Among industry’s biggest asks are measures to tackle high energy prices — these remain around 50 per cent higher for the UK industry than for European competitors including in France and Germany.

“We cannot compete at the moment…it’s about cost fundamentally,” said Jon Bolton of Liberty Steel UK, Sanjeev Gupta’s company which has been acquiring largely distressed steel assets across the world. Bolton called for the creation of a level playing field as part of the sector deal.

Artificial factors

With the uncertainty around Brexit, clarity was key, said Henrik Adam, COO of Tata Steel Europe. Adam warned that the industry had been boosted by “artificial” factors — the movement in exchange rates in the industry’s favour, and the increase in trade defence measures against dumping from China and beyond. “That is not there for ever — it gives us some time, four to five years, to recover our industry,” he said. “It’s not about hard or soft Brexit...we need clarity which gives investing parties some form of security that they can rely on.”

The future of Britain’s trade defence strategy is a growing concern to industry and unions fearful that Britain — which had in the past blocked some EU efforts to bring in anti-dumping measures — will have a weak system post Brexit. Recent legislation passing through Parliament did little to allay concerns.

“At least with the EU you are part of a block of 500 million consumers with the power and leverage to stand up even to a giant like China,” said Stephen Kinnock, the MP for Aberavon (which includes the Port Talbot works) who believes under the system likely to come forward, it will be “incredibly difficult” for producers to initiate anti-dumping measures. “Where is the evidence that the government is actually taking the action we need to see?” he asked.

Public sector purchase

Industrial Strategy Minister Richard Harrington sought to reassure industry that it was on the case, pointing to efforts to increase public sector procurement of UK steel.

The government’s industrial strategy — launched last year to tackle weaknesses in the economy in preparation for Brexit — provided the obvious opportunity for boosting the steel industry, through a “landmark” sector deal, he insisted.

“There are lots of words…what we want is action,” said Redcar’s MP Anna Turley, whose perspective at the conference offered a very human face to what was at stake. “We can’t let (what happened in Redcar) happen to any other community…we are trying to move on in Redcar but it should never ever happen again.”

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Published on February 11, 2018
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