Side corridor of lounge and a peek view of the docks.

Sending out an SOS

08 October 2015

Britain's second-biggest steelmaker Sahaviriya Steel Industries UK (SSI UK) announced late last month that its Redcar plant is to be mothballed or closed, with the loss of at least 1,700 jobs.

From a community proud of its 160 year steelmaking history (Sydney Harbour Bridge is made from Teesside steel), the resounding message is clear: Save Our Steel.

I have a particular interest in spreading this message; I am from Teesside and both my father and brother work at the Redcar plant. But the message shouldn't just come from those directly affected on Teesside. Although the job losses will obviously have the gravest impact on the North-East, where unemployment is at its highest rate (8.5%, 3% higher than the national rate), the closure will have a UK wide effect. The falling unemployment rate has been regarded as an economic success of the last year but this success, and indeed the economic recovery more generally, has been very unbalanced both in region and in sector. This problem will be intensified by the closure, particularly when one considers the potential indirect job losses that could hit contractors, suppliers and local businesses.

What of the effect on UK industry?

Despite steel's position as an essential commodity that underpins a lot of activity in other manufacturing processes and sectors, the UK steel industry as a whole is struggling. If things don't improve, the UK could find itself wholly, or at least heavily, reliant on imported steel. This is problematic as industry already only contributes to approximately 10% of GDP, whilst in comparison the services sector accounts for more than 75%. Services, particularly financial services, are predominantly London-based, meanwhile manufacturing and industry generally takes place outside of London and across the rest of the UK. Meaning a further decline in industry will cause the imbalance between sectors and regions to become even greater. The less diversified the UK economy is, the more unequal and divided the UK may become. If we are to avoid sector-specific or regional crises we must beware of putting all our eggs in one basket.

What can be done in response to the SOS?

Further developments suggest that it is already too late to keep the Redcar factory open as SSI UK has now gone into liquidation. The government insists that EU state aid rules prevent it from assisting and the Department for Business, Innovation and Skills has recently turned down an 'unviable' request for funding to keep the factory open . This is unsurprising given the extent of SSI UK's debts and the fact it has traded at a loss every year since 2011.

If it really is too late to keep the plant open now, mothballing rather than closure must be considered.  Mothballing would allow the plant to reopen when market conditions improve – this actually happened to the Redcar factory in 2012. There have been welcome reports that aid in the mothballing process may come from local British Businesses.  Calls have also been made for the government to assist with the cost of mothballing however the government insists it is prevented from doing so under the state aid rules. Those concerned about the cost of government assistance should consider the millions of pounds it will cost UK taxpayers to clean up the Redcar site following complete closure, not to mention the ongoing costs of the impact on the UK economy.

More generally, the government needs to address the underlying issues that led to the situation on Teesside. Granted, it cannot control market prices but it can challenge allegations of Chinese dumping.  Moreover, energy costs for industries within the UK are far above those experienced across the EU. This is something that must be addressed, not just for steelmakers but for UK industry as a whole.

And what of the thousands of skilled and semi-skilled workers soon to be without jobs? Indeed, the effects of the industrial decline are not only being felt on Teesside, with job cuts in other parts of the UK already this year, and there are more predicted to come.

Steps have been made to combat this; the government has announced an £80m support package  that includes funding for those affected by the Redcar closure to train at further education colleges or to start businesses. Much more needs to be done, however, to fully answer the SOS calls. Education is one thing, but good job opportunities are another.