The government’s refusal to rescue Redcar is a short-sighted mistake that could come back to haunt the UK economy
The closure of the Redcar steelworks is a huge blow to the UK’s steelmaking ability and potentitally to the manufacturing sector in general.
The plant has been in the hands of receivers since its owner SSI UK went into liquidation earlier this month, and with no last minute buyer stepping forward, the hard-to-reverse process of closing down the plant’s furnaces will now begin.
It is, of course, terrible news for the local economy. Around 1700 steelworkers and many other local workers in related businesses are set to lose their jobs. And the government’s pledge to provide £80m to support affected workers will – in all likelihood – do little to alleviate the impact of one of the region’s biggest employers disappearing.
But the closure is also bad news for the wider manufacturing economy. And, whilst there’s no denying the challenging climate faced by the UK steel industry, the government’s failure to step in to find a way of rescuing the plant is a shortsighted mistake that may return to haunt us.
A successful manufacturing economy requires a long-term strategic view. And any administration serious about supporting the transition to a more balanced economy – as the current government claims to be – needs to recognise that business is cyclical.
Worryingly, there’s little expectation that steel prices will recover in the short term, which could spell more bad news for the UK’s remaining steel producers. But, if we fail to protect this key strategic industry, when steel prices do recover – as they surely will at some point – the cost to the UK could be punishing.
At a hastily convened “Steel Summit” which will be held later this week, steel companies, MPs, and trade unions will meet to consider solutions to the challenges faced by the sector.
And whilst any effort to solve the industry’s crisis will come too late for the Redcar plant, there are still measures that can be taken to protect the UK’s remaining steel producers, not least finding a way to protect industry from the cripplingly high energy costs it faces.
There is also another glimmer of optimism. Whilst restarting a blast furnace is a tricky and expensive process, it’s not, as some reports seem to imply, impossible.
Indeed, it’s worth remembering that the very plant which is currently being shutdown, was itself relit three years ago, when SSI acquired the site from Tata Steel.
It’s a faint hope. But just maybe the dismal scenes currently unfolding on Teesside won’t mark the end of the region’s century-long relationship with steel.