Steel’s importance to Port Talbot is obvious. Less clear is how strategic Tata Steel’s UK business is to the remainder of the UK economy, and what is threatened by its possible disappearance.
Steel represents just 0.1 per cent of UK economic output and has declined over the past 25 years, even as the manufacturing sector has maintained output. Yet advocates of a strong steel industry say local supplies of steel underpin Britain’s industrial base.
“If the soil is no good in the garden, you cannot grow the proper vegetables. If we do not have access to high-quality steel, we cannot make precision components,” said Paul Forrest, head of economic research at the Midlands Economic Forum. “We would not have had the massive expansion we have had in manufacturing and aerospace over the past few years.”
Mr Forrest said 260,000 jobs in his region are part of the steel supply chain.
Others argue that for the UK’s manufacturing ambitions, local sources of steel production are helpful — Nissan’s factory in Sunderland, the largest car plant in the UK, buys 45 per cent of its sheet steel from Port Talbot — but not vital, even for industries that might be deemed crucial to the national interest, such as defence.
Andy Neely, head of the Institute for Manufacturing at Cambridge university, said: “Steel is undoubtedly foundational for so many products — but so is cement or plastics. You can only make the case that steel is a strategic material if you are worried that we would not be able to have access to supplies from elsewhere.”
The steel for Trident nuclear submarines is supplied from France, while the latest generation of Ajax armoured vehicles will use mainly Swedish steel. “No UK steel manufacturer was able to meet the prime contractor’s requirements,” Philip Dunne, the defence procurement minister, told parliament last year.
“The reality is there’s high-quality steel right throughout Europe. If [UK] steelmaking wasn’t to exist, I doubt very much that it would have a significant impact on manufacturing in the UK,” said Chris Asgill, analyst at CRU.
“But there are some implications for sectors, such as automotive, which often require supplies just-in-time and from a geographically close supplier”.
Where available, UK-made steel does play a role in equipping the country’s armed forces: almost all of the steel for the latest Queen Elizabeth class of aircraft carriers was made by Tata in the UK.
John Louth, senior research fellow at the Royal United Services Institute, the defence think-tank, said: “The quality of British steel has made a big difference to the UK defence industry, for example, making sure the new aircraft carriers stay as light and fast as possible.”
But defence projects are not enough to anchor the steel industry. Current UK defence programmes represented less than 1.5 per cent of UK steel consumption in 2013, Mr Dunne told parliament last year.
Source: FT