Forging a future for the British Steel Industry
- Centre for Employment Relations, Innovation and Change
In response to the growing crisis in the UK steel industry, in early 2016 the UK All Party Policy Group on Steel and Metal Related Industries (APPG) decided to develop its own strategy for the future of the steel industry. This would be presented in the form of a strategy report.
I was approached by the APPG to research and co-author the report- ‘Steel 2020: Forging a Future for the British Steel Industry’ - which was launched in Westminster, in January 2017.
The overriding ambition of the APPG was to more effectively engage with the development and evolution of government strategy for the UK steel and manufacturing sector. At a more specific level, the report was to identify the key policy areas crucial to the wellbeing and future sustainability of the UK steel industry. Once identified, these would be assessed for ways in which government strategy for steel could be built in terms of immediate areas for action and areas that would require more medium and long term planning.
The research for the report was based upon two elements. Firstly, existing statistical analysis of the state of the industry was used to frame the investigation. Secondly, and that which provided the APPG report with its unique insight, industry leaders and experts from across the range of technical, manufacturing, production, financing and policy fields were interviewed under the UK Parliamentary Select Committee evidence gathering process. These witnesses provided invaluable insights into the policies and strategies that are necessary to help produce a viable UK steel industry and national industrial strategy.
The specific stimulus for the report was the crisis that had engulfed the UK steel industry. Associated as it was with unrelenting global pressure on the European and UK steel industries, the period since the financial crash of 2008 had been a prolonged almost perfect storm for the UK steel industry.
Since 2014, these pressures had accelerated through increasing capacity in the Middle East, Russia and China and increased import penetration of commodity steel. These dynamics had been compounded by structural weaknesses facing the steel industry, such as adverse energy costs and business rates, diffuse supply chains and insufficient public procurement policy.
These developments had an enormous impact on the UK steel industry. Sahaviriya Steel Industries (SSI) mothballed, then closed its steel making plant in Redcar on Teesside at the end of 2015. Capacity and jobs were lost across other major steel manufacturers, including Tata Steel and Caparo industries. In early 2016, Tata Steel announced its plan to sell its UK steel business. Tata’s Long Products division was sold to Greybull, which is now trading as British Steel, and in November 2016 Liberty House agree to purchase Tata’s Specialty Steel business. The sale of Strip Products UK was abandoned in July 2016.
The main findings of the report are grouped under seven themes and policy areas. These are:
1. A radical reshaping of the energy market to reduce uncompetitive energy costs faced by the steel industry, improving energy efficiency and spreading out the burden of decarbonisation policies.
2. Ensuring free and fair international trade by developing a clear UK post-Brexit trade strategy to minimise uncertainty. This should include trade defence instruments against Chinese dumping, as well as maintaining single market access vital to steel and related sectors such as automotive.
3. A positive procurement policy to ensure domestic steel is used as far as possible in public projects, including enforceable rules and greater use of a ‘Kitemark’certification system.
4. A national review of business rates, removing the perverse incentives that punish investment in capital by steel producers, while compensating Local Authorities to ensure no loss of income.
5. Supporting supply and value chains within steel and the wider manufacturing sector. The government should take a more strategic view, incentivising key areas of supply chains to re-shore in the UK so fewer steel products are exported abroad for final processing.
6. For advanced economies like the UK, industry needs constant innovation to improve productivity and remain competitive. The government must take a strategic role in supporting R&D and upskilling of the workforce, while also ensuring support for skills retention and “short time working” tied to training and upskilling, enabling companies to respond to fluctuations in the market without cutting jobs. The report calls on the government to provide support for investment by creating a National Bank for industry. A Steel Catapult, (an industry specific, specialist centre for research and innovation) is essential to provide a base for new ideas and the report calls on the government to override vested interests to support this.
7. A more collaborative relationship between industry and the trade unions, working together to develop a national industrial strategy which includes worker representation on boards. The report also calls on the government to provide financial support for mothballing in incidents of plant closure and for the workers made redundant to ensure skills are not lost.
Emanating from the seven themes and a SWOT analysis (strenghts, weaknesses, opportunities and threats) conducted by witnesses, the report contains 43 concrete policy recommendations aimed at immediate needs such as change to business rates for capital intensive industries and the creation of a Catapult for the steel and metal sector, to more long term strategic considerations such as a reengineering supply and value chains and a strategic overhaul of the cost/price base of the UK energy sector.
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The views expressed in this article are those of the author and may not reflect the views of Leeds University Business School or the University of Leeds.