Our problem with steel

Scunthorpe steel 650

Great Britain is the cradle of the industrial revolution. So for a long time in history we were the world’s largest producers of steel. This was driven by a number of economic factors: cheap energy (lots of coal), cheap labour and huge demand from a wide range of steel hungry industries.

And now that has all changed. Energy has become costly because the trade unions refused to make our coal industry productive and efficient, they protected small numbers of jobs in individual pits and ended up losing the whole industry, with all of them losing their jobs. Then in 2008 Ed Miliband introduced his Climate Change Act which made energy extremely pricey for all users, as every household knows. Labour is also now very expensive in Britain, which is why your jeans are made in Bangladesh and your iPhone is made in China. We are all middle class now. And the demand has gone. Ships are now made in South Korea instead of Clydeside, once again due to the actions of recalcitrant trade unions. Our great car plants in Coventry and Birmingham have gone, again (no surprise) as a result of trade union action. And we don’t build trains and other heavy lumps of engineering for the world any more.

All this would cripple an industry, but there is even worse. Steel was nationalised. Like all nationalised industries it didn’t have to look after its customers and it didn’t have to be efficient, so it didn’t and it wasn’t. Steel became a massive job creation scheme with 10 men doing one man’s job. All paid for by the taxpayer. Margaret Thatcher, on coming to power, was forced to close the most egregious plants, they were hemorrhaging money on an immense scale, the remaining industry was restructured so that the rump was less inefficient. Then it was privatised, so had to face international competition and look after its customers. Things that it was not culturally adapted to do. So it has been downhill ever since.

There are only two things that kept the UK steel industry going. The first was that steel making is capital intensive, new plant costs a lot of money. So there was a lull whilst the rest of the world invested and caught up. The second was the explosion of China from a third world country to a developed country in just a few short years. This put incredible demands on the world’s ability to produce all commodities. Which meant that our inefficient steel industry could still find customers. But China’s growth has gone and with it the customers for expensive British steel.

But there is a light at the end of the tunnel. Just as there are many kinds of pet dog or eating apple there are also many types of steel. The stuff that girders are made of is a lot different to what razor blades are made of, as are the maraging steels used in our missiles and nuclear warheads and the Hadfiels steels used in tank tracks and buldozer blades. With many special steels the volumes made are much smaller and the prices are much higher. They are all about technology, research and development, innovation and intellectual property. We can still do this as well as anyone in the world and it is here that the future of our steel industry lies. We just cannot compete with China, India, Brazil etc for bulk steel.

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