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RUTH SUNDERLAND: If the government is serious about our industrial future, it should be committed to supporting steel, rather than selling it to foreign buyers
- Arguments over thousands of jobs in the steel industry flare up
- Reports suggest British Steel has approached Business Secretary for bailouts
- Bold claims blast furnaces are unlikely to be viable due to energy crisis
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As if the prime minister didn’t have to worry enough, a row over thousands of jobs in the steel industry explodes just as an already blood-curdling party conference gets under way.
British Steel, which is Chinese-owned despite its name, has called for an urgent bailout likely to cost hundreds of millions of pounds, according to Sky News.
The company claims its blast furnaces are unlikely to be viable without emergency support due to the energy crisis.
Under pressure: A row over thousands of steel industry jobs explodes as Liz Truss faces a bruised party conference
The company directly employs 4,000 people and pays higher-than-average wages in Red Wall areas, including Scunthorpe, where voters’ loyalty to conservatives may be tentative. Thousands more jobs in the supply chain could also be affected.
It would be inflammatory to hand over large amounts of taxpayers’ money to a Chinese company in the current atmosphere. In the years of Cameron and Osborne, the Tories tried to join Beijing, but the mood has deteriorated for several years as relations are tense over the treatment of protesters in Hong Kong and the abuse of Uyghur Muslims.
The government is no longer relaxed about Chinese involvement in key sectors such as telecom, nuclear power or even steel.
Needless to say, the call for financial aid from a company that boasted of its open checkbook when it took over British Steel three years ago comes at a most inopportune time when the government has been accused of fiscal irresponsibility in its mini-budget. .
As I warned at the time, British Steel’s sale to Jingye for around £50m at the end of 2019 was flawed from the get-go. The deal smacked of opportunity: It easily avoided job losses in northern constituencies during Boris Johnson’s election campaign.
The suspicion was that the Chinese bought an important property cheaply. At that moment, Jingye’s chairman Li Ganpo, a former communist party official, turned the syrup hose on full blast.
He was delighted to see a ‘wonderful future’ in which British Steel would ‘rekindle the glory’ and ‘impress the world!’ ‘Need money? No problem. Jingye is here to invest.’
Rather than take that deluge of grit at face value, the then government should have kept a gold stake in British Steel and forced the Chinese to make legal commitments about jobs, investment and supply chain companies. As it is now, ministers are in a bind. The steel industry, while greatly declining, still directly employs 34,500 people and supports an additional 43,000 supply chain functions.
The government could provide support, including help with high electricity costs, which had been a problem long before the war in Ukraine broke out. In 2019/20, for example, producers in the UK paid 62 percent more than those in Germany. The sector has been asking the government to help eliminate inequality for years.
Steel in the UK could have a great future. The UK is well positioned for net zero production thanks to our expertise in electric arc furnaces and carbon storage in the North Sea.
Government projects will require 5.2 million tons of steel over the next five years. Buying from the UK rather than importing could boost the economy by up to £4bn.
Trade regulators need to adopt a realistic, rather than dogmatic, free-market approach to dumping cheap Chinese reinforcements, which they seem to have realized lately.
If the Truss government is serious about growth and securing our industrial future, it should be committed to long-term support for steel, rather than selling it to self-righteous foreign buyers.