Brexit is at a critical final phase, and concerns across many industries are increasing about the huge impact a ‘no deal’ scenario would have on them. The once great British steel sector is no exception.

Former glory

An industry that once led the world has struggled for years to compete against lower-waged, lower-cost countries. And, although the Port Talbot Steelworks in Wales is one of the largest plants in Europe, the UK steel industry is a shadow of its former glory, when it provided employment to over 320,000 in 1971.

Near collapse
Autumn of 2015 saw the end of 170 years of iron and steelmaking in Redcar, in the north east of England. And in 2016, plummeting global steel prices, a flood of imports, unfavourable exchange rates and high energy costs put the whole of this once great industry on the verge of collapse. The Port Talbot site alone was haemorrhaging over £1 million per day and the declining sector employed a mere 24,000 people. This number has now increased to around 32,000, but is still just a tenth of the situation in the 1960s and 70s. Nevertheless, and although responsible for only 0.1 per cent of the country’s economic output, steel is still seen as a cornerstone of UK manufacturing.

Port Talbot steelworks in Wales employs 3,500

Source: Chris Shaw, wikimedia

Global player once again

Following their merger with ThyssenKrupp, the Tata UK plants are now part of a pan-European venture with annual sales of around €14bn, and so back to being a significant global player again. The industry is also benefitting from the weaker sterling following the Brexit vote. But analysts are not so convinced that the industry could take another battering if things get really tough after March, especially in view of the global overcapacity in steel production. So, what could a post-Brexit future hold for the industry?

Renationalisation

Following the Second World War, most of the UK steel industry was nationalised. In 1988, it was re-privatised as the British Steel Corporation. In 2016, there was even speculation about renationalising the UK steel industry. Although this option no longer appears to be on the table, the government may be to provide financial support for the industry post Brexit; an option forbidden as long as the UK is subject to EU law.

EU benefits

According to the UK steel employers’ organisation, UK Steel, their industry benefits from EU safeguards more than any other industry. Following the introduction of Trump’s tariffs, concerns were high that the Chinese and others would dump unsold steel in Europe. The EU put their own tariffs in place to counter this. However, in the event of a ‘no deal’ Brexit the responsibility for imposing any such tariffs and safeguarding against dumping would fall to the UK themselves. It is clear that customs and border authorities are far from ready to take on this mammoth task, putting the UK steel industry under threat.

Weak and vulnerable

Thousands of direct and indirect jobs are currently benefitting from the EU safeguarding measures that have ensured prices have risen and so stabilising employment in the industry. UK Steel and the steelworkers’ union, community worry that foreign exporters would take advantage of the UK’s lack of preparations for a ‘no deal’ Brexit, warning that exiting the customs union may leave the UK with some of the “weakest trade defence systems in the world and … newly exposed to steel dumping from countries like China.”

Limited negotiating room

UK Steel is also worried that the UK government’s own negotiating hand will be weakened as they need to go in search of new trade partners following their exit from the European Union. Moreover, exiting trade with traditional European partners will also change as the UK becomes just another supplier.

“Too early to know”?

Although the UK government is in the process of establishing a Trade Remedies Authority to investigate relevant cases and make recommendations to ministers, few expect anything to be ready in time for a ‘no deal’ Brexit. In fact, a spokesman admitted they don’t yet know whether the UK will introduce countermeasures comparable to those now in place from the EU. Ironically the quote from the spokesman says “it is too early to say if the UK will continue to apply current countermeasures once we leave the EU.” It may be “too early” for the UK government, but it’s getting rather late in the day for a UK steel industry, keen for reassurance that their sector will be safe post Brexit.”

Getting ready for the unknown
None of the thousands of commentators around the globe, or even the politicians and civil servants directly involved in the negotiations, knows quite what will happen after Brexit Day on 29 March. One thing is for sure, we need to monitor what’s being said closely and be ready for the considerable impact a ‘no deal’ Brexit would undeniably have, not only on the UK steel industry, but on the global industry too.

Keeping you informed

At Steel Solutions, we’ll be doing our best to follow what’s going on and keep you informed of any steps we see being taken.

To assess how Brexit could affect your business, contact us at:

E: info@steel-solutions.nl

T: +31 (0)43 6096200