Don't save British steel, help its workers retool
With the announcement that Tata is looking to sell its British plant in Port Talbot, South Wales (a decision which also affects its plants in three other British cities) the great rebalancing project for the British economy looks in danger. The temptation will be to find some way to rescue the steel plants in the name of the broader goal; but that would be a mistake.
Since the financial crisis, the British government has been hoping to see some of Britain's output move from finance to manufacturing, from the prosperous south of the country to the ailing industrial north, from consumption to investment and from imports to exports. Chancellor of the Exchequer George Osborne noted back in 2014 that "the recovery is not yet secure and our economy is still too unbalanced." Britain, he argued, was not investing enough and not exporting enough. "We can't be passive observers of the forecasts. We need to roll up our sleeves, get to work and make it happen."
So how will the government, given this commitment, approach the steel plant closures? Finding another buyer won't be easy and certainly it won't be a quick fix. With up to 15,000 jobs at stake, the prospect of state aid is already being mooted.
Of course, unless Britain votes to leave the European Union in June, any state aid would need to conform with EU rules. But those constraints aside, the the economic case for intervention depends on whether the difficulties being faced by the industry are temporary or long-term. In its decision, Tata points to a global oversupply of steel, high costs and currency volatility. Having looked at future prospects, Tata concludes that current circumstances "are likely to continue into the future and have significantly impacted the long-term competitive position of the UK operation."
Source: The Telegraph