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Northern Powerhouse – The gap between reality and rhetoric

REDCAR NORTHERN POWWERCUTThere is no better illustration of the gap between the rhetoric and reality than the Government’s failure to support our steel industry.

The UK steel industry is in crisis. While George Osborne was in Shanghai this week selling the UK energy sector to the Chinese Government, steel production on Teesside could come to an end after 160 years. One of the main reasons cited for the steel crisis is the action of China dumping excess steel onto international markets. Eurofer – the organisation that represents European steel producers, stated

Chinese import pressure and unfair trade practices are certainly the root causes underlying the pressures that steel plants, such as Redcar, are facing. China now sells its excess steel to the EU at prices that do not even cover the costs for raw materials and material transformation.”

The closure of the UK steel industry would result in the direct loss of 30,000 skilled jobs as well as impacting thousands of jobs in the supply chain. The loss of steel production in the UK would be acutely felt in our industrial heartlands, which are already blighted with high unemployment and a lack of highly skilled jobs. The North East would be particularly vulnerable, with steel production already suspended on Teesside.

There will be irrecoverable damage to our regional economy with the weakening of our manufacturing sector undermining efforts towards rebalancing the economy.

The UK Government cannot continue to watch from the sidelines uninterested. Other countries have recognised the importance of steel. In Italy the steel industry has been nationalised, while other countries have addressed issues relating to costs, taxes and imports.

While other countries intervene to support their industry, UK steel producers face a financial penalty in excess of £400 million a year compared to competitors due to exchange rates, energy costs, air pollution targets and business rates. These additional costs, alongside Chinese steel dumping have limited the export market, while also undermining the UK’s domestic market.

Despite promising to rebalance the economy, the financial and service sector led recovery has left steel consuming sectors like construction at below recession levels. A failed unbalanced recovery has left UK steel demand at 75 per cent below pre-recession levels.

The Government’s insistence on a fully open domestic market has left UK steel production vulnerable to unfair trade practices and a refusal to support the industry by promoting smart local procurement to address the decline in domestic use of UK steel which now accounts for only 20% of the market, compared to 90% in the 1970s.

The loss of UK steel would further erode the UK’s manufacturing base and leave the Government’s promise of a Northern Powerhouse in ruins. The economy will never be rebalanced if the Government sits idle during a crisis in UK manufacturing and allows the long-term competitiveness of the UK economy to be undermined.

It would cement the decline of UK manufacturing, resulting in the further loss of skilled employment, as well as damaging research and development within the UK, which is nearly wholly based in the manufacturing sector.

The Chancellor has chased headlines with his Northern Powerhouse rhetoric and now families in steel producing communities are demanding real action. Therefore, I would urge the Chancellor to use his time in China to do more than just sell off UK energy production and access to our financial markets, but to support and promote the real economy and ensure the UK retains what is remaining of our manufacturing base.

Image Credit: photo by John Lord  CC BY

8 Comments

  1. Mervyn Hyde says:

    It really begs the question, if markets reign supreme why are we shutting our bread and butter industries.

    For any effective economy there has to be a supply of feeder industries that provide the essential raw materials that industry needs.

    Not only do we lose the technology but also the expertise and research that a modern country needs to develop.

    What should be evident from our manufacturing decline is that market philosophy has accelerated it and offers no solution of how to arrest it.

    That said, the only reasonable assumption we can draw is that the Market is dead long live the planned economy.

  2. J.P. Craig-Weston says:

    These aren’t really traditional steel plants anyway, they’re secondary or tertiary specialist processing plants, (which would more more logically and cost effectively be located near the actual steel production, ie outside the UK,) processing specialty coatings or making tubes, etc and employing at best only a few hundred people at each plant and owned and operated by foreign companies like Tata, so why should be be paying or otherwise subsidizing them to operate in the UK, this look like just yet more corporate welfare to me.

    1. Mervyn Hyde says:

      J.P.

      There is absolutely no doubt that we need to retain skills, in the short term we must do whatever it takes to keep these companies afloat.

      What we need to do is highlight how disastrous privatisation and market philosophy has been, why we should intervene in the economy and not sit back as the Tories tell us and wait for the markets to decide. We need to expose that lunacy.

      Our manufacturing base is essential to become self sufficient (what is left of it) and we need to nationalise those core industries that supply the specialist raw materials for the rest of the economy, that will provide low cost benefits as well as technological advancement through research, all that is lost in the private sector which retains the benefits accrued to themselves.

      1. J.P. Craig-Weston says:

        Sadly that’s a boat that’s away long ago; whilst I sort of agree with you in principle, (and his would be broader discussion for another day,) I think you seriously underestimate just how trivial this countries manufacturing base has become, 30 years ago after Herald of Free enterprise was sunk, Thatcher placed the order for it’s replacement ship outside the UK, thus depriving our own shipyards of a lifeline that they desperately needed and it’s been downhill ever since.

        Also for all their fatuous enthusiasm about, “manufacturing,” non of our rotten governing class have ever worked for a living in a factory or in a real job and frankly despise those of us who have.

        My point here is that 30 years ago we might, had we then given these industries, (which scarcely even exist anymore, not in any meaningful sense,) the support and the orders they needed to survive have preserved them, but at this point funding forging companies instead makes absolutely no sense at all.

        1. J.P. Craig-Weston says:

          “but at this point funding foreign companies instead makes absolutely no sense at all.”

  3. Bazza says:

    Will of course have additional costs in loss of taxes paid by workers, increased benefits, a cost to businesses built around the industry, a cost to communities, families, a loss of purchasing power.
    A cost benefit analysis would be useful.
    As someone said they spent billions (or was it trillions?) intervening and saving the banks.
    Could try setting up the industry as a public social entrprise, could try a new model with staff electing a qualified board (with worker representation) and communities having a say and have more diversification and local sourcing. Need imagination to explore alternatives to Neo-Liberal dogma and the undemocratic rule of the market.
    This is a hammer blow for the people of Redcar and we should stand by them and the trade unions and not like the Govt – walk on the other side of the road!

    1. J.P. Craig-Weston says:

      we’re talking here about a foreign owned and operated company, (I think it’s Tata unless they’ve sold them on,) employing at best on a few hundred people, it doesn’t matter and wish it did.

      1. J.P. Craig-Weston says:

        Also skills and training are now being operated as just another sleazy racket by companies like Avanta and Serco and G4S, (and their various sub contractors and partners,) and the term, “apprenticeship,” has now been co-opted to described only the kind of shabby third rate training now being inflicted on vulnerable kids and adults mostly as an excuse to get them to work for less than the minimum wage or for no wage at all.

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