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Steel crisis must be tackled to prevent industrial skills crunch, says Randstad CPE

Britain’s steel crisis could trigger a wider industrial skills emergency, and must be tackled, says Randstad CPE.

In a snap poll of specialist engineering workers, 94% support some form of action by the UK government to render Port Talbot and the UK steel industry sustainable and profitable.

More than a third (35%) of expert engineering and construction workers feel the best course of action is to impose tariffs of some kind on foreign steel imports, such as those from China.

In the eyes of specialist workers, Randstad says, this is ahead of other possible courses of action, from a ‘buy-British’ policy for all public sector projects, exempt steel makers from green levies or business rates, and the arguably more drastic option of nationalisation (backed by just 14%).

This is also supported by the fundamentals of steel demand and supply in the United Kingdom – and the much larger number of jobs that indirectly depend on related skills and industry.

Owen Goodhead, managing director of Randstad construction, property & engineering, commented, “Jobs and skills simply don’t behave like volatile commodity markets. Once you have a skills shortage, it is here to stay. Steel itself could just be the tip of a terrible iceberg – and the start of a far longer industrial skills emergency.

“Today the price of steel is low because of an error of oversupply on the other side of the world. If that was a permanent factor, we might need to think twice about trying to compete. It is not. But as a result we are talking about permanently shutting down our own centres of global engineering expertise.

“A whole ecosystem of specialist firms is dependent on the expertise that comes with a flourishing steel industry, just as many of them are also dependent on a sustainable source of steel itself. Our economy in ten years’ time will depend on the support for talent and ambition we can offer workers now – as employers and at all levels of government. The British economy of the 2020s will barely remember the latest blips and eddies of last week’s steel price. Will cheap steel be available from elsewhere in 2026? And more importantly – will the engineering jobs, the strategic defence contractors, the rail workers or the much-needed construction capacity be here in a decade’s time, if Britain jettisons its industrial heartland in 2016?

“Competing with a fundamentally better competitor is a bad idea – but throwing in the towel after a couple of hard knocks is just as shameful. Against unfair and aggressive competition, dumping steel in European markets at a loss, there is space for a constructive and proportionate response. This isn’t controversial in other areas – for example the public accepts supplying a large proportion of our own food as a ‘strategic’ priority, and subsidise British agriculture happily. But steel is treated differently. Even as France declares the yoghurt company Danone a ‘strategic industry’, British ministers are too scared to tiptoe towards the letter of the law. Their Chinese equivalents would have no such scruples.

“There is so much more that could be done to support valuable workers, boost industrial productivity and invest in the human capital we will always need for the future. Meanwhile, Britain needs millions of tonnes of steel every year – and it will have to come from somewhere. This country produces both too little steel, and too few skilled people to feed our industrial economy, and this combination is forming into a growing skills crisis.”

According to Randstad, for expert workers in engineering and construction sectors, the second most popular course of action for addressing the steel crisis is mandating that all public projects, such as defence contracts including warships and infrastructure projects including new rail lines, must use UK-made steel, rather than imported alternatives. One third of specialist workers (31%) said this policy of buy-British was their preferred solution to the steel crisis.

Minimising the costs of production also define the agenda for many specialist engineering and construction workers, of whom 7% say the best way to save UK steel making is exempting steel firms from certain green levies, Randstad says. This tallies with official measures. Including taxes, according to the UK government’s own figures, industrial electricity prices stood at 9.38p/kWh in 2014 – or 20% higher than the average across the EU-15 nations. Meanwhile, a further 7% of specialist workers say that the government should exept steel firms from business rates if this can ensure the survival of the industry.

Goodhead added, “Environmental considerations are hugely important, and an area for the UK to lead the world. And this could be done far better – through intelligent re-use of scrap steel, with lower carbon emissions and lower energy use overall. Steel could be part of a plan for sustainable industry, infrastructure and sustainable energy for the long-term.

“Completing the recycling loop isn’t just a matter of washing up cans and putting the right bins out. We need to actually make something valuable from these materials too. Recycling and efficient use of resources can be the difference between a profit and a loss, a business and a failure – or a job and redundancy. Britain must modernise its steel industry if it is to survive, and if the country can maintain all the jobs and livelihoods connected to a strong industrial spirit.

“Progress can’t just be a word consigned to our history books. We can continue to lead the world in expert science jobs and engineering jobs, enjoy world-class infrastructure and work in shining steel office blocks. But all this depends on the two inseparable issues – of steel and skills.”

Production of ready-to-use steel in the UK could be far higher still, since the country does not handle its own scrap. The latest comparable figures show net exports of scrap steel amounting to 6.6m tonnes leaving the country every single year. This is the same as net scrap exports from France and Germany combined and puts the UK behind only Japan and the United States. On per capita terms, Britain’s annual ‘scrap surplus’ amounts to 104 kilos of potentially usable second-hand steel shipped out the UK for every single adult and child. To extend the previous measure, this amounts to nine bicycles worth of steel exported as scrap for every single adult and child in the UK every single year.

Steel-making methods are partly to blame for the mismatch, Randstad says. The United Kingdom produces its new steel mainly from imported iron ore, even while exporting scrap, because 84% of UK steel production is currently conducted through oxygen-blown furnaces. This is in contrast to more modern electric arc furnaces, which can take in a far higher proportion of scrap steel as raw material. Compared to other major steel-producing nations, this ratio puts Britain level with Hungary, which also produces 84% of its steel through such primary methods and behind only Austria, Czechia (the Czech Republic) and China. Not far off the UK, 93% of Chinese steel is made though the basic oxygen process.

While the remaining 16% of UK steel production already takes place in more modern electric arc furnaces (amounting to less than 2m tonnes of steel each year) this could rise towards 65% of UK production or around 8m tonnes, without needing any new imported raw material – if only the UK could re-use its current exports of scrap steel.

One possible reason for this ongoing inefficiency, Randstad says, is the electric energy required to produce steel from the secondary route of electric arc methods. By contrast, oxygen-blown steel production can be more immediately polluting, but is heated primarily through combustion of carbon instead of costly electricity.

For UK steel in particular, this is often blamed on especially high energy costs. Compared to a country such as Sweden, where electric arc furnaces produce a third of steel output mainly from scrap steel, the UK’s industrial energy costs are 90% higher.

Goodhead concluded, “Modernising the steel industry should be a natural aspiration. Our car makers turned around a basket-case industry in the 1970s to one of record car exports in 2015 – achieved through modernisation of production methods, and leading the global technology race when it comes to the quality of the finished product. The same could be true for our steel-makers.

“This should never be thought of as a short-term fix. No entrepreneur would invest that way. Instead steel must be profitable and part of a long-term sustainable economic plan for the industrial skills base of the future. How will we have a car industry without steel, or the aspiration and education that goes along with it? How can we have aircraft carriers without steel? How will oil and gas jobs and rail jobs be sustainable without steel? Or a glittering financial services sector in great steel towers, without steel? How will we have the much-vaunted ‘balanced economic recovery’ without steel?”

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