India’s Tata Steel has decided to sell its UK steel business, which will put thousands of jobs in jeopardy. The steel industry hasn’t recovered to pre-financial crisis levels, and while demand to steel is relatively low, the UK is still importing the majority of its steel from China.
Curtiz Cotterell, Lecturer in Law in the Suffolk Business School, responds:
The main problem with the crisis in the steel industry is one based on a failed economic model that has existed in the UK for the last forty years. To put it briefly, during the 1960’s and 70’s the UK government was actually the owner of many unprofitable businesses. British Leyland who owned a number a car manufacturers; British Aerospace, most of the bus companies; all of the utilities, I could go on. Many of these businesses were run at a loss, costing the country billions of pounds. The solution according to the newly elected Thatcher government was to privatise them all.
Over the next twenty years, many important industries were sold off at below market rates and were told to be more efficient, which many of them did. The main problem with such a model, is that some of these industries (coal in particular, and steel) were so woven into the fabric of the UK’s industrial heartlands that a failure of these industries would have devastating effects not only on the employment prospects of its employees, but also the entire economic wellbeing of all surrounding and villages and smaller business’s that relied on the wages of those who worked in the industry.
Many of the new owners would promise the government that jobs would be protected, only for such promises not to be kept, a good example of this would be the chocolate industry in Bourneville, where the same promises were made only then to see much of its production transferred overseas. The same is true for car production – Ford and BMW to name two.
A possible solution which seems to be unpopular with the government is for renationalisation, what the steel industry needs is investment, the type of investment that can only really come for the government. In my opinion any attempt by a private company to “ Save British Steel” cannot be guaranteed.
Another solution would be too impose tariffs on the State aided Chinese Steel Production that is devastating the Steel industry not just in the UK but world-wide.