With the collapse of British Steel, the long running saga of one of the last remnants of Britain’s once proud steel industry seems to have come to an end. The company teetered on the brink of collapse in 2016, and then owner Tata Steel just managed to find a buyer in private equity group Greybull Capital, who acquired the beleaguered company for a Pound. Since then global steel prices have fallen by 20%, but it was the exclusion from the EU’s carbon emissions scheme which proved the final nail in the coffin. Having to still comply with the EU’s rules, but denied access to £120 million worth of carbon credits – effectively an allowance to emit carbon despite the regulations – the company was in deep trouble. The British government stepped in and loaned British Steel the money, but just weeks later it seems it was all to no avail.
In usual economically illiterate fashion, the left is accusing the owner, Greybull Capital, of running the business into the ground. And while PE houses are often proponents of high risk/high return corporate strategies, they are of course a major loser as well – not just financially but reputationally (media quickly picked up that Greybull is behind other high-profile failures such as Comet, My Local, Rileys and Monarch Airlines).
But all this is semantics. British Steel’s problem was simple: they were producing steel at a price which is significantly higher than what it is worth on the market. For years, China have been flooding the global market with cheap steel – cheap because the Chinese state is heavily subsidising production, which is already in a favourable competitive position due to cheaper production costs and less onerous regulation, especially when it comes to the environment. But of course, unless you happen to be in the steel business, that is good for Britain. Cheap steel means cheaper production costs, benefitting industry and consumers alike. We should be celebrating, and taking advantage of, the mistake the Chinese are making, not lament it as “unfair” competition.
Predictably, the left has made calls for nationalisation of the industry, but a change to state ownership would do nothing to the underlying inability of British Steel to compete internationally, and to ask taxpayers to subsidise the continued production of steel is absurd. It’s tough to lose one’s job, but like horse cart makers and weavers, jobs in the British steel industry are simply a thing of the past – and truth be told they have been for a while already. Sadly, it’s not just the left who’s been crying foul: it has been a sad spectacle to watch politicians who are supposedly proponents of free markets jump on the bandwagon and blame EU rules against government assistance for the collapse of British Steel.
Another curious point is why is it usually only manufacturing jobs that are candidates for saving by the government? On the same day that the story about British Steel broke, celebrity chef Jamie Oliver’s chain of restaurants filed for bankruptcy with the loss of around 1,400 jobs. But politicians did not demand a bailout of Jamie’s Italian. Industry is somehow special, perhaps because of the heavy unionisation which forces the arms of politicians who are afraid to stand up to organised labour, or maybe for sentimental reasons in the country of the industrial revolution, which shows the utter lack of principle and pandering to public opinion that we can add to the list of unfortunate character traits of mainstream politicians, a list which includes the economic illiteracy which makes them think any bailout is a good idea in the first place. The government has no role picking winners among private companies and should not throw taxpayer money at loss-making ventures.