The crisis in the UK steel industry has deep roots. Globalisation and the opening-up of world markets; a slowdown in Chinese manufacturing, creating massive over-capacity in its steel plants; a subsequent boom in cheap Chinese exports and a collapse in the global steel price.
Those pressures have become intense since 2012: but the story of steel in the UK has also been one of a 40-year decline in output and employment. In the early 1970s, the UK industry was producing almost 29m tonnes and employing 325,000 people; by last year, the figures were 12.5m tonnes and 30,000 people.
But decline is also relative. The business, innovation and skills (BIS) select committee, in a detailed review of the government’s response to the steel crisis last December, made an important point: other major EU countries, notably Germany, Italy, France and Spain, have done better at protecting their steel industries. In terms of production, the UK has been bottom of that mini league table since 2001, having once been second only to Germany.
Should the UK government – and successive governments – have foreseen the crisis? Could it have been handled better? What could politicians have done differently?
Energy costs
The UK steel industry has complained bitterly for years that it pays higher energy costs than European peers. The Eurostat figures quoted in the BIS committee report make the point. In 2014, UK steelmakers paid about 80% above the EU median for their electricity. UK government policies to meet legally binding targets to reduce carbon emissions are partly responsible. Yet the desire to give a helping hand to heavy industries was also recognised in the 2011 autumn statement via the Energy-intensive Industries Package.
In practice, the full package was only implemented last year. The BIS committee commented: “Successive governments have not prioritised the issue sufficiently to force it up the agenda at the European commission, which could have approved the full package years ago. This delay has directly affected the competitiveness of the UK steel industry and been a contributory factor to the current crisis.”
Compensation packages and exceptions from environmental taxes have costs elsewhere, of course: in the end, other consumers are obliged to pay. But the point seems clear – the government was prepared to help steel, but actual remedies were slow to arrive.
Source: The Guardian