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RUTH SUNDERLAND: Why steel is still worth saving

Tottering steel magnate Sanjeev Gupta vowed yesterday that no UK steel plants will close on his watch. His resolve is commendable, but his options are limited.

The problem for Business Secretary Kwasi Kwarteng and the Government is what to do about Gupta’s Liberty Steel plants.

Kwarteng has already – quite rightly – turned down a request for £170million of rescue finance, on the grounds UK taxpayers’ money might vanish overseas, lost in the magnate’s labyrinthine business empire. Boris Johnson has declared it would be ‘crazy’ not to support steel.

Out of his hands: Steel magnate Sanjeev Gupta vowed yesterday that no UK steel plants will close on his watch

Out of his hands: Steel magnate Sanjeev Gupta vowed yesterday that no UK steel plants will close on his watch

But there is a school of thought that the industry in the UK is no longer viable, and that the Government ought not to use any more public funds in its support.

It is true that the number of jobs – 3,000 at Liberty Steel – does not in itself justify a rescue. These are small beer compared with those that will be lost in the pandemic in retail and hospitality.

It is also true that steel has lurched from one crisis to the next, with a succession of failing plants scrabbling to find a buyer and pleading for state support.

The most recent of these was British Steel, which was kept going after it fell into insolvency at a cost to taxpayers of almost £600million, until a buyer emerged in late 2019.

That purchaser was by China’s Jingye, any queasiness about the Beijing regime having been overcome by the expediency of avoiding Red Wall job losses in the middle of an election. 

The Government is reported to be drawing up similar contingency plans to run Liberty Steel on taxpayer cash whilst looking for a new owner to take it on.

Another option is nationalisation, on the basis that steel, like the banks, is too important to fail. Despite the succession of steel crises in recent years, the Government has not yet made any coherent effort to support the industry – it has merely scrambled to find sticking plasters when trouble has hit. 

A proper strategy would include a ‘Buy British’ policy so that domestically produced steel is used in defence, green technology and big infrastructure projects such as HS2 and Hinkley Point nuclear power.

Gupta himself has been on a potentially promising environmental tack with ‘greensteel’ or recycled scrap using electric arc furnaces powered by renewables. 

His plants still have prospects, even if his ownership does not. The Government could help on business rates and energy costs, which are far higher for UK producers than in France or Germany.

Steel is worth saving. There may be far fewer jobs at stake than in the past, but they are important jobs. 

They are in constituencies where the Government cannot afford to lose votes and they create high added value. 

And it seems foolish, with all Covid and Brexit have taught us about the danger of complex and far-flung supply chains, to rely on overseas imports.

With a long-term strategy involving government, owners and unions, and a commitment to buy British, we could still save our steel.

Snuberoo

As the City chews over the disastrous Deliveroo float, a consensus seems to have emerged that it represents a black mark against London in terms of attracting tech floats. I’m not sure this is the correct conclusion to draw. 

A record of more than £7billion of capital has been raised this year on the London Stock Exchange in 25 initial public offerings, ten of which were tech and consumer internet businesses. 

Some companies such as Britishvolt and Cazoo have chosen to list in the US but that doesn’t mean there is a hostile climate. Nor does the exuberant debut of The Hut Group, a tech-powered consumer business that floated last year.

Deliveroo’s downfall was that it got on the wrong side of too many big traditional City investors, who turned up their noses in a collective snuberoo. 

When even James Anderson, the manager of the Scottish Mortgage investment trust that is famed for backing tech, said he was lukewarm then it was clear there was a problem.

Much has been made of investors’ dislike of the dual share structure giving founder Will Shu control of voting rights. 

This does indeed go against governance norms. But big City institutions usually go along with it if they think the investment case is compelling enough. 

That’s what they did at The Hut, where founder Matt Moulding has a similar arrangement in the form of a ‘golden share’.

Deliveroo might yet come good. Ocado was treated with similar disdain when it floated and went on to be a stellar success – but not before it had re-invented its business model.

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bourbiza

Bourbiza Mohamed. Writer and Political Discourse Analysis.

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