U.S. Markets open in 2 hrs 34 mins

British Steel: Closure would ruin a historic industrial town and allow Britain to be ‘held to ransom’

Ben Chapman

Devastated workers protested on Thursday, urging the government to nationalise British Steel or urgently find a buyer. Former workers at the stricken company’s Scunthorpe plant said that closure would ruin a town built around the steel industry for a century and a half.

Scunthorpe MP Nic Dakin warned Britain could be “held to ransom” by other steel producing nations if one of the UK’s few remaining major steel plants were to close.

British Steel’s Scunthorpe site faces being shut down permanently unless new investment can be found after the company went into compulsory liquidation.

Charlotte Childs worked at the plant for 11 years after leaving school aged 16 to start an electrical engineering apprenticeship before being made redundant in 2015.

The steel works has provided skilled jobs for generations, she says. Her grandparents and great grandparents worked there and her cousin is now doing a British Steel apprenticeship.

“My story is not unique,” she says. “Steel has been central to the area for 150 years; it’s steeped in history. Scunthorpe was built around steel, not the other way round.”

Closing the steelworks would take out a huge amount of wages from the economy. The average steel worker makes £36,000, well above average for the region and the UK as a whole. It would double the local unemployment rate in the region, even before any jobs are inevitably lost in the supply chain.

But the impact goes beyond that. Hundreds of local businesses rely on steel indirectly.

“My brother has a car garage across the road from the steelworks,” says Ms Childs, who is now a representative for the GMB union.

“Most of his customers work for British Steel or its contractors. Where is his income going to come from?

“There are loads of businesses that are there purposely because of British Steel, like the cafe where the workers can go for a cheeky butty on their break.”

The furnace at Scunthorpe (AFP)

Scunthorpe MP Nic Dakin is determined to find a resolution that allows workers to keep their jobs. Closure would cause strategic damage to the UK, he said.

“This is not just about the core of 4,500 workers that would lose their jobs and not just about those in and around Scunthorpe.

“In the blast furnaces at Scunthorpe we are talking about a national strategic asset. To lose that would damage the supply of steel to key industries like defence.

“The steel industry is the foundation of manufacturing in this country and vitally important for our economy.”

After the UK’s last steelworks closure at Redcar in 2015, the UK now has just two active blast furnaces – Scunthorpe and Port Talbot in South Wales. They provide some of the highest quality steel in the world.

“Once you lose that capability you can’t make your own steel. Are we serious about being a modern, independent nation?” asks Dakin.

Such concerns are particularly pertinent at a time of growing nationalism in trade policy with Donald Trump pushing up US tariff barriers and China responding in kind.

“We would have to import from overseas, where production might be less carbon friendly, the impact on the environment and air quality is higher

“You can be held to ransom if you need to import to build important national assets: your railways, ships, planes and whatever else.

A poster showing Chinese President Xi Jinping is seen in front of the Xinyuan Steel plant in Anyang (Reuters)

Ms Childs agrees that the UK will be left in a vulnerable position. “If the Tories abandon manufacturing in the UK, as they seem to be doing, China will one day finish flooding the market with cheap steel and realise that there’s no competition left.”

Another thing that irks is that despite pledges to support steel as part of its industrial strategy, the government undermined it in one important way.

When EU steel tariffs were proposed after China began dumping steel onto markets, pushing down prices, Britain led efforts not to introduce tariffs that would have protected British steel.

“It’s fine for the government to talk about an industrial strategy, but what does that actually mean?”

Anna Soubry came to visit when steel was facing its last crisis in 2015.

“I couldn’t tell you one tangible thing that they did after that.”

(PA)

While many people might want to blame Brexit for the closure, the government must look at its own record, says Ms Childs.

“Once the Brexit shambles is over there will still be the same problems and issues that were there before.”

British businesses pay twice as much for energy as their French counterparts while business rates are five to 10 times as high as on the continent.

Redcar

The experience of Redcar, points to what could befall Scunthorpe if the British Steel plant were allowed to close. Average weekly wages have gone from being some of the highest in the region to amongst the lowest since the steelworks shut.

“Redcar knows only too well the cost of a closed steelworks and the impact it has on families, on communities, and on the local economy,” says MP Anna Turley.

“Former steelworkers still contact my office needing support.”

British Steel’s Scunthorpe site – which is as big as a town in itself – also poses big, and expensive, problems for the environment.

Steelworks can leave behind a toxic legacy which presents dangers to the public. Following a plant closure in Corby, Northamptonshire, 19 children were born with deformed feet and hands after their mothers inhaled toxic particles while pregnant during the Eighties and Nineties.

In Redcar, many more millions need to be spent to make the site safe and ready to become productive again.

“It’s costing millions every month, and has been for three and a half years, just to keep the site safe,” says Anna Turley.

“That is before any real clean up work has begun.

“The cost of closure is astronomical, especially in comparison to much smaller sums needed to protect the assets, keep them running, and give the business and workforce a future.”

The cost of environmental clean-up in Scunthorpe would be “at least” in the hundreds of millions of pounds and would take years, says local MP Nic Dakin – a huge bill that would be footed by taxpayers.

“While its operating and it’s safe it’s all an asset but once it stops operating there are some dangerous things there,” he says.

So what next for British Steel?

Some critics have said that market forces must be allowed to run their course and that the industry is in terminal decline - 186,000 were employed in UK steel in 1981 compared to just 32,000 last year. Yorkshire and the Humber has already been the worst hit region with 40,000 jobs gone.

But there this simplistic story of decline is misleading. Despite little support from the government, the average steel worker has become roughly five times more productive than they were in 1970; a significantly bigger improvement than in the economy as a whole.

Given the UK’s current dire level of productivity growth, jettisoning some of the country’s most skilled workers would raise some serious questions.

Now that the company has gone into liquidation there are three main options: find a buyer, nationalise or close it down.

The public broadly supports nationalisation, with 48 per cent of people believing British Steel should be taken back into public ownership compared to just 18 per cent thinking the opposite, according to a new YouGov poll.

It reveals that, even among Tory voters, 41 per cent think British Steel should be nationalised compared to 30 per cent who don’t.

This leaves a tricky decision for business secretary Greg Clark. Nationalisation of key assets such as the energy and rail networks has been a high-profile element of Labour’s policy platform - and one that some Tories have ridiculed.

To take the British Steel into public ownership could easily be seen as a capitulation or at least an admission that Labour has a point. But to do otherwise could appear heartless. It would also be criticised as a failure of the government’s industrial strategy, part of which was supposed to be a sector deal to support the steel industry.

Clark has said that there are interested private-sector parties but Ms Childs is wary that an “unscrupulous” owner may enter the fray.

“We don’t want a buyer that wants to take certain bits of the steel works and discard the rest or charge extortionate rates of interest.

“We want someone who will take the whole thing and make steel in Scunthorpe for the foreseeable future.”

“One thing is for sure” she says. “Through the financial crisis, the 2015 steel crisis and this current crisis, the men and women that work at that plant have always turned up, worked hard and delivered the best steel they can.

“They will never stop doing that. Unless the gates close for good.”