It is right for the government to bail out Britain’s steel industry. On Wednesday ministers stepped in and kept British Steel going, not only to safeguard thousands of jobs but keep blast furnaces burning that would otherwise go out for ever. Letting this business disappear would deal a devastating blow to North Lincolnshire. The company’s distress was forged in the fires of Brexit, for which this government ought to take responsibility. Closing the plant could also not easily be squared with ministerial promises made on Monday to increase the amount of UK steel used in national infrastructure projects.
The company will be readied for sale to a future buyer. It is unlikely to find one. British Steel is in fact the rebadged Scunthorpe steelworks bought from Tata Steel when it was on the verge of going bust in 2016. Yet there is a good case to keep the plant running: steelmaking jobs are highly skilled and well paid. British Steel supplies 95% of Network Rail’s tracks. Its loss would mean Britain has no choice but to import increasing volumes of steel for infrastructure projects. It matters how a rescue is facilitated. The European commission allows governments to help steelmakers regain competitiveness but bans them from offering cash to restructure ailing steelmakers. Britain has been a centre of steelmaking since Henry Bessemer developed a method to mass-produce the metal cheaply in the 1850s. Its share of world production has shrunk as China’s state-subsidised steel mills have thrived. It seems obvious that there needs to be a rethink over state aid rules in the EU to allow for the national interest in key industries to be taken into account.
However, British Steel is only part of the problem. When Mr Bessemer died the global annual production of Bessemer steel ran to £11bn in today’s money. Yet inventors who create and build from scratch have become rare. Instead such talent has given way to bankers who make money through financial rather than industrial engineering. The skill here is not to take the long view; it is about being adept at manipulating financial structures to extract wealth. The private equity firm Greybull Capital that bought British Steel charged £20m a year in fees and interest from the company. Greybull had a record of failure; its anti-Midas touch saw an airline, an electrical chain, convenience stores and a snooker hall business all go bust when it was in charge.
There ought to be some regulation of financial engineers. There’s a lot more destruction than creation in sectors such as social care where balance-sheet stability ought to be paramount. Too many times executives have walked away from commercial wreckage with huge payouts, leaving staff and taxpayers to pick up the bill. An estimated 3 million people now work in firms owned by private equity companies. Are jobs less secure after buyouts? Does pay suffer? Are pensions less secure? It has been 12 years since MPs looked at the industry. Ministers need to be able to answer whether private equity is a form of predatory or productive capitalism.
