UK industry has been in decline for decades, and for the very good reason that production costs are simply too high to compete with Asia and other low-wage/cost economies. The UK is in a transition to a service economy, coal was abandoned years ago and the steel industry has been decimated to employ less than 15,000 people, down from more than 300,000 little more than 40 years ago. Now it looks as if what little is left of our steel production is about to go the way of the dodo too. Or maybe not, because a rescue operation has been launched.
Circumstances have definitely not been kind to British steel producers lately. Inflated energy costs due to the government’s crusade against carbon have been doing damage for years. Steel prices have tanked by almost 75% in a year and a strong Pound is adding to the problem. Now, to make matters worse, the Chinese are subsidising their own steel industry and have started flooding the market with cheap product.
To state the obvious, consumers benefit from cheaper products and when someone is offering to sell goods below production price, even better. But unfortunately in this case we are to be prevented from taking the Chinese up on their kind offer. The government is being lobbied by the steel industry to stop us, and Westminster is obliging. The British government is launching a rescue plan for Tata UK’s steelworks, including Port Talbot, the country’s biggest steel plant. If this doesn’t lead to outright nationalisation (which is probably against EU rules), it will likely translate to imposing tariffs on cheap Chinese steel to make it so expensive that British (and maybe other EU) manufacturers can continue to produce and sell their own, inefficiently produced version. So the industry is saved and you, the consumer, get to spend more money for the same product. Politicians are hoping (and they are probably right) that the public don’t realise that they are paying for the party, and rather than joining the ranks (and statistics) of the unemployed, the British steel workers can continue in their unviable jobs.
Of course there is pain while workers are being re-skilled to other employment, but we are letting an industry get away with robbery, stealing from the productive part of the economy to avoid the fate which should rightly come to inefficient businesses. British steel is uncompetitive; it should not be produced. If the Chinese are stupid enough to subsidise their already cheap product, why are we not taking advantage? Let’s enjoy the cheap steel that the Chinese are willing to sell to us, and let the capital and resources tied up in the UK steel sector be reallocated to more profitable parts of the economy.