Steel yourself

What odds would you have got 25 years ago that by 2007 Rover would be owned by a Chinese company and British Steel by an Indian one?

The former we have known about for a while, the latter came to pass this week when Corus, the successor to British Steel, was snapped up by Indian conglomerate Tata, which added the company to a burgeoning list of interests ranging from Daewoo vehicles to Tetley Tea.

The Corus deal leads us back to a question that has occupied this newsletter quite a bit recently, and which usually sparks a lively debate. Should we celebrate this development or be worried by it?

An acquisition on the scale of Tata Steel’s takeover of Corus will inevitably involve a search for synergies ­– for which read cost savings ­– after the deal is done, so some apprehension among the Anglo-Dutch group’s thousands of UK employees is inevitable.

In the longer term, however, the takeover may prove to be good news for the British steel industry even though British Steel itself has long been consigned to the corporate history books.

The name of the game in the global steel industry is consolidation and scale. The deal that brings Tata Steel and Corus together is worth more than £6bn, but still only puts the merged entity at number five in the list of global steel giants.

Corus has achieved considerable success in turning itself into more than a commodity steel manufacturer. It is recognised as an innovator in its field, using advanced technology to create products that meet the diverse needs of the markets it serves. It is, in the phrase of the moment, adding value, and a significant chunk of the expertise that allows it to do that is in the UK. That is partly what made Corus attractive to its new Indian owner.

That UK-based technical capability needs a big enough owner to allow it to shine on the world stage. This week’s deal has a good chance of giving it that opportunity.

Andrew Lee


The Engineer & The Engineer Online