speri.comment: the political economy blog

The Steel Crisis: Government, Multinationals and Regional Imbalance

Concerns about regional economies mean that even in an increasingly financialised and globalised steel sector the government is maintaining stewardship responsibilities

Ewan Gibbs, Early Career Lecturer in Sociology and Social Policy, School of Media, Culture and Society, University of the West of Scotland

ewangibbs-100Steel, the essential raw material widely understood as the precondition for industrial development, has been thrust into the centre of the debate about the UK’s economic future by the threatened closure of the last major basic mills. Into the mid twentieth century, national economies were appraised by using steel production as a surrogate for their development and power. The present steel crisis has revealed elements of perceptions of power and helplessness of a different sort. These relate to the implication that the crisis will further deepen the process of deindustrialisation in regional economies.

This is politically sensitive, especially following the Conservative government’s promise to develop a ‘Northern Powerhouse’ to ‘rebalance’ the British economy both sectorally and geographically. The approach of government towards the current crisis has differed dramatically from the active role government played in reshaping the industry through the mid-twentieth century, and the overseeing of rationalisation and privatisation during the Thatcher years. This has centred on the alleged powerlessness of nation states within a globalised economy, particularly with regard to the activities of the Indian multinational firm Tata, which owns most of Britain’s major steel mills.

From the 1930s to the 1960s, steel was at the heart of political arguments over the rejuvenation of British industry. This had origins in the Conservative-led National Government’s implementation of a tariff structure which protected steel from foreign competition in return for guarantees from industry of investment and the restructuring of firms.

The centrality of steel to the British economy was confirmed in the 1948 parliamentary debate over the Iron and Steel Bill which proposed and led to the industry’s nationalisation. On both sides of the divide this related to key issues of power within the economy. Alexander Anderson, Labour MP for the Lanarkshire steel town of Motherwell, justified public ownership during the debate, on the grounds of steel’s centrality to industry in West Central Scotland: ‘We have built up around steel a vast, complex organisation of ancillary and processing industries whose very life depends upon a constant supply of cheap steel’. Even opponents of nationalisation related their concerns to steel’s strategic importance in the Clydeside regional economy. The former Conservative Secretary of State for Scotland Walter Elliot, referred to the ‘denationalisation’ of Scotland through the implementation of centralised London control over the sector.

Steel was the only major industry taken into public ownership between 1945 and 1951 that the Conservatives privatised upon re-entering office in 1951. Yet between 1951 and 1964 concerns with regional economic development continued to shape Conservative government policy towards the steel industry. In particular, major inducements were made to entice Colvilles in Scotland, and Richard Thomas and Baldwins in South Wales, to invest in strip steel production at Ravenscraig in Motherwell, and Llanwern. In both cases this related to industrial diversification objectives; strip steel was the vital material to bring mass production manufacturing to areas of Britain dependent on faltering heavy industries.

Government involvement in managing the contraction of steel was confirmed by the Wilson government’s re-nationalisation in 1967. From the late 1970s onwards, restructuring was accelerated through the imposition of financial performance targets on the industry. In the ten years between 1978 and 1988, British Steel’s workforce fell from 271,000 to 52,000 as the industry headed towards privatisation. Then as now, concerns about Britain’s international position shaped discussion on the steel industry’s future, in particular the emergence of Japanese competition played a major role in arguments for plant closures and rationalisation. However, unlike the present circumstance, there was little doubt over the role of government which was the principle force overseeing restructuring. Until British Steel was floated in 1988 some vestige of regional policy applied. Despite being a major loss maker Ravenscraig was effectively sustained as a symbol of the Conservative Party’s support for Scottish industry, but was then closed amid much acrimony in 1992.

The present circumstances reveal continuities in concerns over the future of the British economy, especially regional disparities. The ‘#SaveOurSteel’ campaign has seen the industry’s unions, Community (the successor to the Iron and Steel Trades Confederation), Unite, and the GMB, joined by local political representatives, especially Labour Party MPs, and local authorities, in campaigns on Teesside, in South Wales and Yorkshire and Humberside. Within Scotland, the novel feature of political devolution has allowed the Scottish Government to establish a Scottish Steel Taskforce to facilitate the sale of Tata’s speciality plants at Motherwell and Clydebridge to Liberty. This is linked to the ‘reindustrialisation’ vision centred on renewable energy manufacturing presently being promoted by the Scottish Government.

Across the UK, the discussion has focused on the role of government within a ‘globalised’ economy. Advocates of #SaveOurSteel have pointed to the fact that other European countries have intervened in favour of their steel industry, and underlined the perceived unfairness of subsidy-fueled ‘dumped’ Chinese imports which are widely blamed for the losses facing steelmakers in Britain. A key argument of proponents of government intervention has been to counterpoise the vast efforts made to prop up the banking sector with inaction over the ‘real economy’. There are indications this has incurred some acceptance of responsibilities by government. Sajid Javid, the Business Secretary, and prominent supporter of free market economics, initially rejected nationalisation but has had to make significant concessions to arguments for government action. This was confirmed on April 21st when the government announced it would be willing to take a stake in the industry and coordinate investment with a private buyer. Javid has also actively engaged in industrial diplomacy efforts with the objective of cutting global steel production levels.

Within the relationship between steel multinationals and government, elements of financialisation are apparent. Following Tata’s announcement of divestment, a Community union delegation went to meet company executives in Mumbai in order to impress on them the importance of steel employment in Port Talbot and Scunthorpe. However, a key related aspect is that the steel industry’s costs go well beyond the current workforce and the mills themselves. This is particularly apparent in an industry which has shrunk as fast as steel. Although Tata only employs 15,000 workers in the UK, its pension scheme accounts for 130,000 savers. Whilst the imposition of financialisation during the 1980s related to the shifting of priorities from regional economic development and employment towards balance sheets, it now relates to the principal activities of even the most core of industries. These concerns have set the parameters in negotiations between government and Tata. Confirmation of government willingness to invest in the industry came alongside Koushik Chatterjee, group executive director of Tata Steel, providing reassurances on the status of the pension fund. Pensions were also a factor in the Greybull buyout of Tata’s Long Products division, including the Scunthorpe plant, which was secured with concessions from unions, as well as a funding package with government support. As a result, we see a redrawn but continued affirmation of elements of an economic stewardship role for government even within the context of a heavily redefined steel sector.

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Categories: Austerity, China, Development, Economics, Global crisis, Northern Powerhouse, SPERI Comment, Sustainability | Tags: , , , , , | Leave a comment

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