What is the future of steel production in the UK?

January 19, 2016 2:31 PM

Tata Steel is back in the news again but the circumstances haven't changed.

The British steel industry is still in decline, as it has been since 1900, (and 2009) within the EU our steel industry is less important and less innovative. China's very odd steel industry is still incentivising over production of steel by local authorities and Russia and Ukraine are still competing with them.

For our previous blog on steel, with more on the British, Chinese and EU steel industries click here.

What has changed is the response: In October 2015 the response of the media to the closure of the Redcar steelworks seemed to be 'The Government should be investing in British steel, giving grants to the industry and supporting manufacturing'. This time the emphasis has moved to China, and how the EU should enforce a tariff on Chinese steel imports as part of the World Trade Organisation's allowed actions in response to dumping. Most likely because the Government has already tried to address these issues to the best of its ability. The only recourse left seems to be anti-dumping tariffs.

But as argued last time, China isn't the only one to blame. There's the high electricity and green policies in the UK, there's the strength of the pound, there's the indisputable fact that British steel was barely claiming any traction in the EU market, let alone the international one. In fact, the BBC reports that the Port Talbot plat uses as much electricity as the whole of Swansea, which can be found a few miles along the motorway. The total comes to £50 million a year - 50% more than other plants in Europe. Energy is such an overhead that Tata was planning on building a new power plant in order to save money on the cost of power.

Electricity prices in the uk

(Source: UK Steel)

With or without anti-dumping tariffs China's economy is slowing down, leaving steel plants closing and running empty across the country possibly bringing an end to the problem without intervention. And with China set to gain market economy status in the WTO later this year any tariffs would have to be re-examined soon after being set.

The conclusion remains the same:

Firms such as Tata Steel were bound to cut jobs eventually; British steel has been of declining importance on the world stage for a while now. The international evidence seems to suggest other countries are frankly doing better than we are in this area - We’ve lost our comparative advantage.

But many campaigners have hit upon a very pressing issue - the burden of taxes on the steel industry.

 We need a simpler tax code, not one riddled with exemptions that large companies can take advantage of but leave smaller businesses with a bigger burden.

Could these changes have saved the Redcar steelworks? Maybe not. But if we change these regulations now they may be able to give another business, or another industry a better chance at competing on the world stage.

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