There will be some stirring speeches about saving jobs. There will be lots of grand rhetoric about securing a great British industry. Who knows, some of the more mischievous Labour backbenchers may even break out into a chorus on the Red Flag. Parliament will vote on Saturday in favour of an emergency bill that will effectively take British Steel back into public ownership, and pave the way for full-scale nationalisation. There is just one catch. It won’t actually solve anything.
British Steel has been in bad shape for more than a decade. Its Chinese owners, Jingye Group have decided it is no longer worth the vast losses it is racking up and have stopped delivering the supplies necessary to keep it open. As the last surviving blast furnace in Britain faces closure, even the slow learners in the Starmer government have suddenly worked out that in a world where it is ramping up military spending some steel might be quite useful, and in a world dominated by tariffs and trade wars it might be handy to make the metal at home. Very late in the day, it has decided to step in and keep the plant open. It is so urgent, it can’t even wait until Monday.
The trouble is, that won’t actually fix anything. Steel making has been under pressure in all the major developed economies, but in the UK it has faced two unique challenges. We now have the highest industrial energy prices in the world, with the cost of power for factories tripling from 2004 and 2021 and still going up. Industrial energy now costs 74 per cent more than it does in the US, and 32 per cent more than it does in France. For an energy intensive industry such as steel these are crushing costs that make it virtually impossible to make any money; depending on the process, energy accounts for 20 per cent to 40 per cent of the cost of making steel. On top of that, we have saddled the industry with green targets and net zero rules that have made it impossible to run the furnace efficiently. Understandably, the Chinese owners have decided they have had enough.
If Labour decided to fix those issues, it would have a queue of private sector buyers. Instead, it is simply planning to take the company into state ownership. But that won’t by itself do anything to fix the £200 million to £400 million it has been losing annually over the last few years. Indeed, it will only make it worse. The unions will block any redundancies, and the government will find it impossible to drop any of the net zero rules that are the fundamental problem it faces. All it will do is transfer the losses from the private sector to the taxpayer. What the UK needs is a profitable, efficient steel producer. Nationalisation won’t achieve that – it will only make the crisis even worse.
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