Soaring sterling takes the blame as profits slump by 60%

British Steel is to adopt a strategy of decentralising with greater worker responsibility as part of its accelerated job-cutting plan.

This will cut costs and boost productivity, said Sir Brian Moffat, chairman and chief executive, this week as the company reported a near-60% drop in pre-tax profit for the year to March 1997 from £1.1bn to £451m. A further 2,000 British jobs will go over the next 12-18 months.

Moffat said: `The pace and total number of job cuts will depend on the ability of our people to absorb new skills and greater knowledge.’

Multi-skilling and teamworking are being negotiated plant-by-plant with unions, he said.

`Workers must take the lead and own their own plant.’ In return, they can expect similar employment conditions for blue and white collar staff, ending hierarchical structures.

Union leaders are willing to work with managers on the job cutting plan, which they see as a better option to forced redundancies.

British Steel blamed the heavy fall in profits on lower steel prices, particularly in the 51%-owned Avesta Sheffield stainless business, and the appreciation of sterling. Moffat called on the Government for fiscal measures to halt sterling’s rise.

Average revenue per tonne fell by 8%, accounting for some £400m of group losses. Losses by the stainless business accounted for a further £200m.

Aside from job cuts, British Steel plans to reduce its supplier base and squeeze more out of its assets by working plants to capacity. British Steel’s cash position remains strong, with net funds of £785m. This will go towards planned capital expenditure this year of about £400m and could fund acquisitions, said Moffat.

These are likely to come in the Asia-Pacific region. British Steel is already building high value steel processing lines in a joint venture in India.