Issue 132 September 2016
Material to the economy
Embodying several decades of industry experience, UK Steel provides a central voice to the steel manufacturing sector that offers support to modern challenges ranging from business rates and oversupply to a changing political environment
With a history that is deeply entwined with the development of the country’s steel production, UK Steel represents the leading trade association and unified voice for the steel industry within the UK and beyond. Formerly known as the British Independent Steel Producers Association (BISPA), UK Steel has been at the forefront of representing the interests of steel manufactures in the UK during periods of both national and private ownership and today continues to champion the sector. During 2001 the BISPA changed its name to UK Steel before finally undertaking a major restructuring and merging with EEF, the leading trade association for manufacturing in both the UK and European Union, to become a stand-alone division within the federation. EEF was founded in 1896 as the Engineering Employers’ Federation and later merged with the National Employers’ Federation in 1918. In November 2003 EEF rebranded itself as EEF – the Manufacturers’ Organisation and currently incorporates thousands of members, comprising manufacturers of all sizes across the UK.
EEF is the leading voice of UK manufacturing and engineering that also provides a comprehensive source of business support. It is the aim of EEF to aide businesses operating within the manufacturing sector to continue to be able to thrive, innovate and compete both locally and on a global scale. The organisation works with a wide range of individuals ranging from industry leaders, managers and professionals to young people apprentices, policy-makers and media representatives, which enables it to promote and support enterprise within the UK, while making sure businesses remain future-focused and competitive. As an independent division within EEF, UK Steel shares the goals of the wider organisation and provides its members with a central point of contact and specialised support. Membership of UK Steel is open to all UK-based companies involved in the production of steel as well as to the associated down stream processes including rolling, drawing, coating and tube making.
“Our membership is made up of almost the entire UK steel sector, which includes all of the steel making companies operating within the UK and most of the downstream activities within the market. We are here to represent that sector as a whole, to liaise with the Government to provide further services and support to the steel industry, as well as to work with our members to develop best practice guides and innovations relating to health and safety and technical considerations,” elaborates Director, Gareth Stace. “Recently due to the steel crisis the sector has seen a number of job losses during the past year and we have been the main voice of the steel industry in relating its concerns to the Government and to the media. UK Steel has been focused on highlighting the crisis itself, its causes, what has happened in terms of job losses and market conditions, as well as what we as a sector believe are the solutions to the crisis in terms of what the Government can do to help us and what action can be taken in the UK, Brussels and globally. We would like to create a level playing field for all steel companies globally to compete and trade in what is essentially a global market.”
Despite the challenges currently facing the steel industry, steel remains a vital part of everyday life and UK steel producers have invested in the future of steel manufacture as a key component in the development of a sustainable world. Indeed, Steelsteel has been at the heart of more than 100 years of progress and it is anticipated that the material will be equally fundamental to meeting the challenges of the next 100 years. Steel is also the most widely recycled material in the world, with more waste steel recovered in the UK and recycled than all other materials combined. This makes steel a highly sustainable commodity, for example each tonne of scrap material recycled by the steel industry saves 1.9 tonnes of iron ore and 0.6 tonnes of coal. The steel sector also makes a valuable contribution to the UK economy and in 2015 the industry contributed over £2.3 billion to the UK balance of trade.
As the leading voice of the steel industry, UK Steel communicates with government and parliament representatives in both London and Brussels with a goal to influence policy that underpins rather than undermines the long-term success of the steel sector. UK Steel harnesses the power of media to compel the government to take action to support the steel industry and has enjoyed several achievements in recent years. For example, through UK Steel’s intensive campaigning it was announced at the end of 2015 that State Aid approval had been granted for the Energy Intensive Industries Compensation scheme. The package is worth approximately £90 million per annum to the steel sector. The UK Government has also recently committed to permanently exempt the steel sector from renewables policy costs, voted in favour of anti-dumping measures, called an emergency Competiveness Council meeting in Brussels and has pushed for the Trade Defence modernisation package to be accelerated. Furthermore, through the work of UK Steel the
Cabinet Office and others, guidance has been published to ensure social issues are taken into account when procuring major projects, unlocking significant opportunities for the steel sector.
While UK Steel has enjoyed significant success in protecting the interests of the steel industry, the current steel crisis within the UK and globally demonstrates that there are several issues that need to be urgently addressed in the immediate future. “What we have seen when looking at the root causes of the steel crisis in the UK, is that there are three main components that have contributed to its development. For example, the UK steel industry faces unilateral costs that even our competitors in Europe do not face. There has also been a strong pound in recent years that has hurt the UK steel exports globally and finally, over capacity from China and other regions has equally impacted the steel manufacturing sector,” Gareth says. “The intention is not to look for handouts to support a ‘wounded’ industry because we strongly believe that the UK steel sector is one that is able to compete on a global market, although it has also recently found its hands tied behind its back to some extent.”
The unilateral costs facing the UK steel industry include energy prices, where UK manufacturers has previously paid more than double the price for energy when compared to competitors in France and Germany for example. While in recent years the UK government has taken some action in this area by compensating the UK steel manufacturing sector to the value of £90 million to help lessen the impact of energy prices, the problem of high energy costs continues to persist for UK steel manufacturers. “The reason that energy pricing continues to be a problem is that it is difficult or even impossible for UK steel manufacturers to pass these costs on to the customer because steel pricing is usually set at a global level, or if not at least at a regional level. Currently despite government assistance there is actually still a gap between the UK steel sector and its competitors in Europe of around £50 million in terms of what they pay for electricity. These unilateral energy costs exist because the UK government has provided funding to renewable energy and introduced carbon and energy taxes, while not paying close enough attention to the impact of this on other sectors, which has resulted in significant job losses in the steel industry,” Gareth explains. “While the government is increasingly aware of these issues, there are other areas such as business rates which are also universally frustrating for UK manufacturers, with UK firms paying five to ten times what our counterparts in Europe are paying. This discourages UK companies from investing in new plant machinery to promote modern business practices and manufacturing and is ultimately a tax on investment. Again the present government has taken an interest in this area and has suggested that UK needs a new industrial strategy, which we feel must look across the board and we hope will remove plant and machinery from the valuation process that sets the level of business rate that a company pays annually.”
One of the most high-profile challenges facing the UK steel industry is that of the influx of under-priced steel products from China and other markets around the world. Over the last five years for example, the market share of imported reinforcing bar from China into the UK has risen from zero per cent to 43 per cent as a result of excess product being sold into the global market. “The problem stems from the fact that we have had several fast-growing economies, particularly China, which had massive production and therefore a significant need to consume steel. In recent years the Chinese economy has slowed slightly while its steel production has continued to increase, therefore within a few years the steel industry in the region had developed a massive over capacity. As a result companies increasingly turned to the export market to dump excess steel products,” Gareth reveals. “Around 12 months ago the UK government was not very supportive of trade defence instruments and nor was it historically supportive of EU proposals to impose trade tariffs on China or other countries. With the appointment of Anna Soubry as Minister for Small Business, Industry and Enterprise during May 2015, within only a few weeks she had expressed a belief that the Government needed to change its position and support fair and sensible tariffs on imports of dumped steel. The government also became more supportive of EU proposals on trade tariffs and on ensuring that these were robust enough to address dumped products, such as reinforcing steel.”
While the government has been more receptive to the needs of the UK steel industry in recent months, the result of the UK decision to leave the EU has created a series of fresh challenges for the steel sector. “I think the headline for the steel sector is that it is going to be more difficult for the steel sector in the UK, however we are looking at how we can turn negatives into positives while looking for further opportunities,” Gareth concludes. “Looking at trade defences for example, theoretically once the UK does leave the EU, the government will have more freedom to set its own rules in investigating the impact of dumped steel on the market deciding the robustness of tariffs. UK Steel is very keen to work with the Department for International Trade going forward to set out what we, as a steel sector in the UK should be and how they should work. We will also work with producers of commodity products in the construction and automotive sectors for example, to promote the increased use of UK manufactured s eel over the coming years.”
Services: Support to steel manufacturers