The British steel industry has been staggering from one crisis to another for the whole of this year. Half of the industry has fallen into effective state control, and what’s left is teetering on the edge of collapse. The government has finally come up with a plan to rescue it. In collaboration with the US and EU, it wants to create a ‘ring of steel’ protecting all the major Western industries from cheap Asian imports. It sounds simple enough, but there is just one catch. This plan won’t do anything to fix soaring domestic costs – and that is the real problem.
The government certainly needs to do something to help the steel industry. It took control of British Steel, with a plant in Scunthorpe earlier this year, while Liberty Steel, with plants in Rotherham and Stocksbridge, collapsed into government control last month. The UK has failed to secure an exemption from President Trump’s tariffs on steel imports, and now the European Union is planning to put 50 per cent levies on UK exports as well. Add it up, and one point is clear. The industry is in dire trouble and does not look as if it can remain viable for much longer.
The British industry has become hopelessly uncompetitive
The proposed Western ‘ring of steel’ would protect all the American and European manufacturers against cheap Asian imports. Keir Starmer’s government is negotiating a deal with both Washington and Brussels, according to leaks, that would synch up external tariffs from outside the bloc, while allowing free trade within it. At the margins, it might help a little. But the trouble is, it won’t fix the main challenges the steel industry faces.
The British industry has become hopelessly uncompetitive. An ideological obsession with net zero means that our industrial energy costs are now twice as high as in France and four times those of the US. Given that energy typically accounts for between 20 per cent and 40 per cent of the total costs of running a steel plant, it is an impossible burden for any manufacturer to carry. On top of that, we have added a series of environmental levies, we have hustled the producers into making ‘green steel’, and we have pushed up employment costs with extra National Insurance charges and a higher minimum wage.
It is not just that we can’t compete with cheaper Asian manufacturers. We can’t compete with the French, the Germans or the Americans either. A ‘ring of steel’ is not going to make any difference. It will just mean that the industry fails against a different set of competitors. Unless the government is willing to start working out how to reduce energy prices and lifts the green targets imposed on the industry, a Western tariff wall will hardly even slow down the rate at which it is collapsing – and very soon there won’t even be a British steel industry to protect.
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