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Why vast projects such as HS2 could be best route for UK steel industry


Bristling with enough nuclear firepower to level several cities, the first of Britain’s four new dreadnought-class submarines will cruise out of Barrow-in-Furness shipyard some time in the 2030s.

The replacement for the Vanguard class, lurking beneath the waves with its terrifying cargo since 1994, is being built by BAE Systems at a projected lifetime cost of £31bn.

Yet while the UK’s nuclear capability may be seen by some as emblematic of British military steel, the reality is that the steel inside the subs will be anything but British.

The most recent government disclosures, for 2018-19, offer greater insight.

That year, BAE Systems bought £7.7m worth of steel for the dreadnought project, yet none of it was produced in the UK.

That is not BAE’s fault so much as a facet of the way the global steel industry looks today. As fast as capability and capacity abroad has skyrocketed, the UK industry has declined, limiting the domestic options for buyers of specialty products.

Nor is BAE a big customer of the steel industry in the grand scheme of things. It buys a few thousand tonnes here and there, modest by comparison with the national output of 7.9m tonnes a year, or demand for 5m tonnes set to come from projects such as HS2 and Hinkley Point.

But it does feel emblematic of the long, slow deterioration of the British steel industry and raises questions over what the government should be doing to revive it.

The 2018-19 figures show that UK producers missed out on millions of pounds of contracts, in everything from school building to NHS accommodation facilities, to the decommissioning of the Sellafield nuclear power plant.

For one £440,000 contract, a box encapsulation plant to house nuclear waste at Sellafield, government analysis shows 53% of the steel was supplied by UK producers, when 100% could have been.

On another £350,000 contract, all of the steel could have come from the UK but none did. A host of other contracts simply have no information about whether UK producers might have been able to do the job. According to the industry trade body UK Steel, the government only knows the origin of 20% of the steel that is used in public projects.

Liberty Steel is the latest producer to find itself in crisis, in its case owing to the collapse of the financial backer Greensill. Liberty joins Tata Steel and British Steel on the roster of UK firms that have flirted with disaster.

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Now the government is under pressure from Labour and the UK Steel to support the wider industry. Key to this is ensuring British producers are not crippled by energy costs that are sky high when compared with those enjoyed by overseas rivals. Business rates are another key factor.

But the government could also ensure that millions of tonnes of steel going into upcoming infrastructure projects comes from Britain wherever possible.

Projects such as the dreadnought will not move the needle on that. Beefing up procurement rules for vast initiatives such as HS2 and the Hinkley Point C just might.



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