Prime Minister must act now as one in six jobs in the industry comes under threat due to a deluge of cheap steel imports from China
The announcement that 1,200 jobs will go at plants in Lanarkshire and Scunthorpe is a further major – and possibly even fatal – blow for the country’s beleaguered steel industry.
The latest job losses come just days after the Redcar steelworks in Teesside shut down production, putting 2,200 employees out of work.
Although 270 jobs will go at Tata Steel’s last two Scottish operations, in Cambuslang and Dalzell, the decline of the industry is a UK crisis.
The key driver of the collapse can be found in China. Total world steel production virtually doubled between 2000 and 2014, with most of it coming from China. The country produced 779 million tonnes of steel in 2013, 48 per cent of the world’s total and seven times as much as its nearest rival. Output in the UK in the same period was just under 12 million tonnes.
In fact China is churning out so much steel that some companies are selling it overseas at a loss because demand at home is insufficient. British companies cannot compete with these prices and jobs are being axed as a result.
It’s also expensive by international standards to produce steel here. Industrial energy costs at are more than 50 per cent steeper than in other major EU economies, while business rates are also costly. The strong pound has also made UK exports less attractive.
But for there to be any chance of salvaging the industry before it is too late, David Cameron will have to step in. And he will have to do it quickly.
The Tory business minister has already claimed strict European rules on state aid, especially relating to the steel sector, mean direct intervention by the government is not allowed. Anna Soubry insists the government’s “hands are tied” and “simply giving a loan or underwriting things, we cannot do”.
Support can be extended in the form of cash for research and development, but emergency bailout deals such as those brokered during the banking collapse are not permitted.
Labour politicians and union leaders have accused the Tories of fiddling while UK steel burns, claiming other European countries would have taken decisive action to save such an important sector.
It is obvious that the very survival of the industry in this country and the communities who depend on it has reached crisis point, with one in six steel jobs now under threat.
Yes, technological advances and changing markets mean some industries will succumb to Darwinian forces and become obsolete in the long term. And it is true that the UK makes only a minimal profit from steel. In 2014, exports were worth £6 billion while imports were £5.9 billion. But there is enough life left in British steel to justify an 11th-hour intervention to save it.
Some have suggested the Prime Minister could change the way the steel industry operates, perhaps removing charges for greenhouse gas emissions. Or he could lower business rates or take action against “dumping” of cut-price Chinese steel on the EU market.
All options should be explored urgently. Falling back on a claim that “our hands are tied” is the easy way out, and smacks of a lack of desire. If the UK government is serious about saving the steel industry, it will have to do better than this.