Labour call on Government to Save our Steel

25 September 2015

Friday 18th September came with the devastating news that Redcar's iron and steelmaking facility would halt production at its blast furnace facility, with immediate effect. Following several months of missed payments on loans totalling £80m, Thai-based Sahaviriya Steel Industries Public Company Limited (SSI) is being forced to wind down production, putting thousands of local jobs at risk. Yet as the home of steel looks down the precipice, the UK government seems content to observe the impending tragedy with quiet and helpless reserve, despite several months of desperate calls from unions, campaign groups and politicians for action.

The Teesside steel plant employs 2,000 people, 1,000 contractors and is linked to 5,000 jobs in local supply chains. A further 50 apprentices currently on site demonstrate the crucial role that the facility plays in providing much-needed, skilled, jobs to an area with some of the highest levels of unemployment in the country.

The current crisis has not come without warning: years of strife have seen the site reopened in 2012 by SSI, following two years of closure and a £290m takeover from Tata Steel in February 2011. Ever since, SSI has been reliant on continued financial backing from its parent company and the support of several senior banks, accruing losses of £194m in 2013.

However SSI and Teesside's troubles are just the latest in a crisis that is sweeping through the European steelmaking industry as a whole. The financial crash has had a proudly damaging impact, with European demand for the metal still 25 per cent below pre-2008 levels. This slump has now reached critical levels, as cheap Chinese exports flood the EU market at a rapidly accelerating rate: between 2011 and 2015 alone, the proportion of Chinese steel entering the market has increased four-fold. The price paid for slab steel has fallen from £318 per tonne to just £191 over the past year.

The UK government so far has put its inaction down to strict EU rules on how states are permitted to allocate financial aid to ailing industries. Business Minister Anna Soubry has said that though the UK government can, for example, invest in research and development within a sector, it is not allowed to use state cash directly to support steel production by providing loans or underwriting them.

Whilst it's true that EU rules on state aid provision are strict, they are not unbendable: several precedents of state governments intervening in order to rescue key industries from certain collapse show that the European Commission is willing to allow governments to rescue industry from collapse in exceptional cases. In Italy in 2015, the Italian government effectively nationalised the Ilva plant in Taranto, by placing them under "extraordinary administration" after the owners were accused of failing to contain certain toxic emissions. France's Socialist government in 2012, though it never went through with its warning, threatened "temporary nationalisation" at the Florange blast furnace in order to guarantee 629 jobs at risk.

And perhaps the most obvious precedent of all is when EU governments including our own took the unprecedented step of bailing out the banks following the financial crash of 2008, to the tune of trillions of euros.

Clearly, when it comes to taking action to save our steel industry, Conservative ministers are not without options. What they lack is political will.

In the case of Teesside's steel plant, the jobs at risk reach into the thousands, with 150 workers at the mothballed South Bank coke ovens in immediate danger. The 160-year old Redcar furnace is the biggest of its kind in the UK and the second largest in Europe, producing at 3.5 million tonnes of steel per year at full capacity. Responsible for up to seven per cent of the North East's exports as a whole, the now endangered site is the bedrock of our regional economy and proud history.

It is not too late for Teesside, but the government must act now. First, by removing business rates on heavy industry that penalise investment in machinery with crippling levies. Second, by bringing energy costs in line with our European competitors and so putting an end to charges for UK steel that are over 50% higher than in the rest of the EU. And finally, by being creative. The European Commission is much more likely to agree to exceptions to state aid rules if the package presented by the UK includes plans to protect our environment. SSI's Teesside site is part of a hugely ambitious Carbon Capture and Storage (CCS) project, and presents the government with a golden opportunity to place North East steelmaking and the UK firmly on the map as global leaders in carbon-reduction. CCS has the potential to drastically reduce energy costs and lower carbon emissions, create jobs and attract key investment into the region, but only if we support the industries on whom its success depends.

I have built a career on defending the jobs and rights of European steelworkers, and supported the vital Save Our Steel campaign when Tata Steel mothballed the site in 2011. As Labour Member of the European Parliament I have been warning about the impending crisis in the steelmaking for many months now, and I don't intend to stop now. Steelmaking is at the heart of the true "Northern Powerhouse", a concept that that the Conservatives now attempt so cynically to claim as their own, and to let it fail would be the most devastating of blows to our region and the thousands of workers and their families that depend on it. The time has come to strop expressing sympathetic platitudes and shrugging shoulders: only swift, concrete action on the part of the UK will bring our steel industry from the brink. 

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