The “steel crisis” is not a 2016 phenomenon. The industry took a dive before the world war booms and the 1973 oil crisis. It was nationalised by Labour back in 1967 and then privatised in 1988. Historians have argued that Labour kept unemployment in the industry unnaturally high, ignoring the problems that came hand-in-hand with out-of-date plants, low efficiency and soaring costs. Privatisation, while bringing investment, cut costs, including labour. Then again, the union-backed Labour party has never been good at taking the ability to pay into account.
Yet here we are again: Governments no longer protect the domestic steel industry against globalisation. China has a massive capacity for producing steel and has been busy dumping it at below market prices. The industry now has higher energy costs compared with EU competitors, some of which have energy governmentally protected to off-set the Chinese under-pricing.
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But the EU, which the Labour government is ironically championing, is a major player in the downfall of the steel plants as it takes a harsh view on propping up an industry producing an unwanted product and losing money into the bargain. It also has State Aid rules preventing governments taking an independent view of such matters. The reality is that every Western steel industry has shrunk for 15 years now. Could Labour see that staying in the EU could be one way of excusing this political hot potato without cost?
For British steel and many another sections in the manufacturing industry, a token cut of energy costs or of business rates would be a political sticking plaster, not a cure. Staying in the EU would also make it trickier to ignore procurement rules.
Some people blame China for weak demand, saying China’s own economic problems are affecting the world economy. Yet if you follow Premier Li, a devotee of positive thinking, you’ll find he is determined that his country’s economy will achieve it’s growth targets of 6.5-7 this year, and will use tools to deal with anything that stands in its way. He propounds on promoting market competition and encouraging innovation and aims to provide better services and facilitate business startups.
The Premier claimed there was ample room for investment to boost the economy in underdeveloped areas and professed a willingness to step up financial supervision and achieve financial regulation. He remained adamant that any moves that have been made have been to stabilise the economy rather than any monetary easing.
Britain would hardly be sniffing at a growth of 6.5 this year. It makes the argument that the Chinese downturn is to blame seem a little weak. Others have also blamed the uncertainty of the EU referendum. But they are masters at putting this argument to fit whichever outcome they happen to politically favour.
The reality is that the car industry, that great British staple, is doing well. UK factories’ output for the first quarter of the year was up a China-beating 10.3 per cent on the same quarter in 2015. Sterling has also recently depreciated which should help and if we don’t over-hype bad press about the global growth it might actually happen.
The EU and possible Brexit, global growth, a steel industry which has been a dinosaur for other half a century – we want to be careful not to become a country of excuses.
Meanwhile, February showed the first decrease in numbers of new jobs that we have seen come onto the British market place. And while Brexit is getting the blame for causing uncertainty in the market place, Cavelle suggested it could also possibly have some link to the subdued growth that has been happening since before this all flared up.
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