British Steel, created by Greybull Capital only three years ago, is in serious financial difficulty. It may collapse if the government does not provide a £75m rescue package to support continued operations.
Unfortunately, I wasn’t surprised by this development. The confusion and economic dislocation of Brexit, a global steel glut and the US-China trade war have combined to make the economic climate for UK steelmaking more challenging than ever before – not to mention energy prices that are 50% higher than in Germany, and 100% higher than in France, and business rates five to ten times higher than on the continent.
We must not forget that this is an industry that directly supports more than 30,000 jobs across the UK, generates more than £1.6bn as a direct contribution to the UK economy and supplies top-quality raw and finished materials to critical parts of the UK industrial sector, including aviation, automotive, defence and construction.
“Why should we produce steel when it can be made cheaper elsewhere?” is a question I hear regularly. This ignores the highly paid, skilled jobs the industry supports and the communities that depend on these jobs. It takes no account of the critical role our domestic steel industry plays in delivering value for other key industries: construction, automotive, engineering and others. Particularly the vital businesses that employ many more in engineering: the added value to the sector would undoubtedly be in danger if they could not see a local supply source for their raw material.
The UK steel industry recognises that it must evolve to survive. It must become a global R&D leader and evolve greener, more efficient practices to thrive in a global marketplace.
Steel leaders from companies such as Liberty, Tata Steel and Celsa are committed to exactly that. But despite promising an industrial strategy that would “boost productivity by backing businesses to create good jobs … with investment in skills, industries and infrastructure”, since 2016 the UK government has provided no support whatsoever to UK steel businesses. Ministers have rejected the sector’s requests to work in partnership with government via a steel sector deal.
The steel industry’s measured requests for strategic support rather than handouts have fallen on deaf ears. Requests for a future steel challenge fund, support with competitive energy prices and business rates, and facilitation of new investment through government-backed access to capital were matched by new commitments from the sector to increase production by 40% and investment by 50% by 2023.
Despite being warned by the Commons business, energy and industrial strategy (BEIS) select committee not to “misrepresent” the requests of the steel sector, negotiations on the steel sector deal stalled at the beginning of 2019.
Progressive government investment in the future of steel is essential to secure its future in the UK. Westminster and Whitehall are happy to commit support to other sectors perceived to be of higher value. Yet when it comes to steel, our government will only consider action when faced with a potential catastrophe like the one facing Scunthorpe, which employs 4,500 people and supports up to 22,000 jobs in its supply chain.
Ministers must turn over a new leaf and work with industry and investors to build a positive future. They could start by looking to the Welsh government for inspiration – it became the first signatory to the UK steel charter earlier this week, which will help to boost the amount of UK-produced steel used in public sector supply chains.
Anyone can see that proactive support for industry is better than lurching from bailout to bailout – and all the steel industry wants is to operate on a level playing field.
• Carwyn Jones is the Welsh assembly member for Bridgend. He was first minister of Wales from 2009 to 2018
