Saturday, February 20, 2010

Why is Corus' closure not on the front pages?

As a hammer blow is about to be dealt to the North-East, the government's lack of political will is there for everyone to see.

The media have decided they're not really interested in what could turn out to be the biggest casualty of the economic downturn in Britain so far.

After all, it's a complex and depressing story: the Corus steel plant in Teesside is about to shut down, with 1,600 skilled jobs about to be laid to waste along with a staggering further 8-10,000 job losses in the supply chain.

Much more has been said about Gordon Brown appearing on Piers Morgan's Life Stories or David Cameron's daughter breaking his i-Pod. A regional disaster with a guaranteed knock-on effect is about to take place and most people don't even know.

And yet causes for outrage are there aplenty. Teesside has been leading world steel manufacturing since 1917. Stretching from Redcar to Middlesbrough, it features the largest blast furnace in Europe. Privatised by the Thatcher government in 1988, the company was bought by Tata Steel for £6.7 bn in 2007, creating the world's fifth biggest steelmaker.

So how can it be that, with a general election looming and with every economist warning that extensive job losses pose the biggest threat to the economic recovery, we are allowing such a bedrock of our economy to go down - with devastating consequences for a whole region?

Why can't the government go beyond half-baked claims that they're "prepared to help the company and to work with any potential buyer" and simply take the company by the jaffas and ferry it across to better times ?

Some would tell you that the answer lies in a combination of the massive downturn and British steel being no longer competitive. But there are two flaws in this argument.

Firstly, the government has offered financial support to an ailing sector before. In October 2008, it made £500bn available to the banks in loans and guarantees, forking out financial sums that we didn't even know existed. Sure, it was inevitable, many say, as the entire economy was about to come crashing down along with the banks.

And yet an aid package to rescue Corus would be only a tiny fragment of the Great Bail-Out of 2008. More importantly, it would save the government billions in benefits, re-training schemes and the additional social costs of an entire area.

Also, it would help a sector that will always be viable. Steel will always be needed and British companies will have to buy steel anyway, all the time, except that they'll have to import it from abroad, dealing a further blow to an already embarrassing import/export balance - currently lagging at the bottom of the EU table. Steel manufacturing in the North East is also high quality. Its main competition has rarely stemmed from cheaper countries.

And in fact, Corus has received a number of offers, except that nothing has been finalised. According to Unite the Union, this is a "smokescreen" and a "disgraceful charade": "Serious offers have been made to Corus that would allow production to remain at the plant", said Terry Pye of Unite, "but the management has dismissed them all out of hand".

The suspicion that the sale is being thwarted "for competitive reasons" was also mentioned by the Financial Times: "Ray Mallon, Middlesbrough’s elected mayor, claimed a credible consortium interested in buying the plant had received no response from Corus to a request to 'look at the books' and to allow due diligence".

Nor are people convinced by claims that EU state-subsidy laws would rule out serious government intervention: last year, rules on both subsidy and state loan guarantees were extensively relaxed (at least until the end of 2010) and, according to the European Commission, by April 2009 ten countries had already taken advantage of the more lax system, the most popular example being Germany granting Opel €4.5bn in state guarantees.

It has been estimated that the German government has put aside €115bn to help any company in any industry, the only pre-requisite being that they are "victims" of the crisis and that they were performing well until the downturn kicked in.

It is purely a matter of how high different governments value the role played by manufacturing in society. In Britain, so it seems, it's far from being a priority. Alas, thousands of workers and their families are about to suffer the consequences.


Anonymous said...

Because it's not actually important. The 1970s finished years ago and desperately hanging on the last bits of wreckage from the industrial revolution has shown to be a useless strategy. The people who worked at Corus will find new jobs, doing something the world actually needs. That may not be something all "manly" and nostalgic like steel, but that doesn't matter

claude said...

Yeah, Anonymous.

Thousands of skilled workers and technicians who can actually make things and enrich a country's productivity will find work in a call centre for half the salary.

Alos, Anonymous, I didn't know that steel and manufacturing only happened in the 1970s. Someone should take your expert advice and wake up the Germans and the Chinese, biggest exporters in the world.