How ironic that British Steel goes into administration on the day before the European elections, putting 4,200 jobs at risk in a leave-voting constituency. And how utterly fatuous to blame Britain’s vote to leave the EU for the failure of the Scunthorpe plant.
There is a link with Brexit, but it is not the one mentioned in passing on BBC news bulletins this morning – that our leaving the EU has frightened off European customers.
If anything, the fall in the pound since 2016 should have helped British Steel, making its exports to the rest of the EU cheaper. But that has not been enough to counter the mass of cheap steel that is coming out of China. The Scunthorpe plant very nearly closed in 2016, when its then owner Tata Steel, decided to jettison it.
In the event it instead sold the plant to private equity group Greybull Capital for £1. What has happened since? Global steel prices have fallen by a further 20 per cent. Does anyone seriously think that a plant that was worth a mere £1 when steep prices were a quarter as high again as they are now would be on a sustainable footing even if we had never voted to leave the EU?
The final trigger for British Steel’s collapse into administration, however, was not low steel prices but arguably a demand from the EU for £120 million worth of payments under its Emissions Trading Scheme (ETS) – which is supposed to provide an incentive for heavy polluters to cut their carbon emissions.
Under the scheme, heavy industries which face international competition are given free allowances of carbon credits to meet EU demands – a circular economy of paper which does rather little to help the planet.
The trouble for British Steel is that the EU has decided to stop issuing free allowances to UK firms – at least until Britain has voted to ratify the EU withdrawal agreement. The company, which had been borrowing from its current year’s free allocation to surrender against its previous year’s obligation, was caught short for this year.
The UK government agreed to lend British Steel the £120 million to pay the EU, but such debts pile up. And after a while, companies' creditors have to ask if the business is still viable – or creditworthy. After the bailout for the ETS, even the FT was advising the government not to "throw good money after bad."
Staying in the EU wouldn’t have saved Scunthorpe, but the feeble, submissive manner of our negotiations has certainly dealt the final blow. If there is a lesson to be learned it is the lengths to which the EU will go in order to punish a member which votes to leave – and that we need a complete break from EU institutions as quickly as possible.