It may sound appealing, but renationalisation is the last thing that would have helped British Steel

Editorial

It would have been one of the stranger acts of the dying days of Theresa May’s government to have renationalised British Steel, an important part of the nation’s remaining manufacturing base.

This is, after all, still a Conservative administration, albeit one with its Thatcherite zeal for market forces diluted by “One Nation” instincts, pragmatism and the loss of its majority two years ago.

The government has, though it is rarely mentioned, published a Modern Industrial Strategy. In that white paper, published at the end of 2017, the Department for Business stated: “We will aim to identify opportunities for steel markets and build on these innovation assets across the UK.

“We will continue to engage with industry, as well as with the unions, the devolved administrations and other partners, to develop a commercially sustainable proposition in a competitive global market.”

Those efforts were plainly not enough. Scunthorpe’s steelworks face closure; some 20,000 jobs are affected and at risk.

And so the calls for nationalisation grow louder. But it would also not be successful. For state ownership would have to mean one of two things.

First, it would have simply been a matter of subsidising a loss-making concern indefinitely. On past experience, the general, unspoken, rule is that such operations are simply a way of winding down an industry very gradually – with little fresh investment in plant or skills.

This would have been expensive, and meant taxing successful enterprises to prolong the life of an unsuccessful one.

That might have something to be said for it, for short-term stabilisation, but it would also have been most likely illegal under EU state-aid rules.

Of course, that could be an argument in favour of Brexit; but the rules are there for a purpose, which is to prevent unfair competition and make economies work efficiently.

Better to spend the money on attracting new investment and jobs than postpone the inevitable.

A second approach would have been to try to invest and build British Steel up into a globally competitive enterprise, if not a national champion.

This would have demanded prodigious sums of public funds, with no guarantee that the results would be successful.

British Steel is a tiny player in global terms, without economies of scale enjoyed by rivals. History is full of such industrial experiments gone wrong.

Indeed the original British Steel Corporation (BSC) was the product of the ambitious 1967 nationalisation of most of the sector, at the time to rescue a declining industry then in private hands.

BSC lost huge sums before it was eventually nationalised and privatised in 1988, eventually coming under the control of India’s Tata Steel (Port Talbot) and private equity firm Greybull (Redcar and Scunthorpe), the latter trading as British Steel again.

For the state to have re-entered the business of steelmaking would have needed some overwhelming argument, rooted in the national interest, and with a view to eventual profitability and success.

Very sadly, for all the people of Scunthorpe and those connected to British Steel, neither of those arguments has proved powerful enough with Greg Clark, the business secretary.

Even the claim that steelmaking is a matter of vital strategic national interest – as Donald Trump argues in his fight for protectionist tariffs to protect the US industry – was found wanting.

There is, certainly, a case of some public support, but the British state is no better at running industrial concerns than the private sector, and has usually been worse. Unlike, say, renationalising railways or water, there is no case that steel is a natural monopoly or a public service.

The steel industry across the west generally suffers from the global problem of overcapacity, which translates into substantial Chinese production exported into world markets at prices that few can match. According to some, this is in fact “dumping”, a practice illegal under World Trade Organisation rules, but time-consuming and tricky to prove. In any case, that is not the entire Chinese story; it is intrinsically a low-cost steel industry.

The European industry is also affected by the complexities of the carbon-emissions trading scheme. In Britain, the position of British Steel was made more difficult by Brexit, or, rather, the fact that it did not happen after all on 29 March as planned.

As a result, British Steel fell into further financial difficulties, and the government was honour-bound to lend it £120m. Further state aid, of perhaps £30m initially, would have been required to prevent the appointment of administrators that has now occurred.

More, much more, money would have been needed for the coming years.

The argument for nationalisation will be persistent over the coming weeks. Labour certainly will press it, in part for ideological reasons. So, more understandably, will a proud steelmaking community with world-class output and skills, and a tradition going back centuries, who ask only that their country show some faith in their hard work and dedication.

People in Scunthorpe fear the loss of the steel plant will kill the town. Those fears are well grounded. They see other countries indulge in state assistance, under a variety of disguises, and, in the case of EU states, gaming the system, playing the state aid rules and lobbying the EU Commission to gain any advantage they can.

As things stand, the administrators will be under intense pressure from the Department for Business to find a buyer for the firm, or parts of it. The government should certainly provide emergency assistance to allow that search to take its course, and for creative solutions to be canvassed.

Given that the prospect of Brexit is slowing investment and industrial demand, and is down to government failures in this area, it is right that British Steel and other firms affected by the Brexit mess shouldn’t be shut down simply because of political and diplomatic wrangling.

In any case, the nation will expect ministers to be generous in supporting retraining, relocation and attracting new industries and jobs to the area.

From being the cradle of the industrial revolution, the home of Ironbridge and workshop of the world, the UK is now a bit-part player in the global steel industry.

China’s production is now 100 times as large, America’s 10 times more, and Germany’s five times greater. It has been in relative decline, intermittently, for the past century, though making strenuous efforts to move upmarket and revolutionise productivity.

But, like Consett, Shotton, Corby, Ravenscraig, Ebbw Vale and Redcar before it, Scunthorpe is now facing the toughest of times. Nationalisation may not be the answer, but that community needs and deserves all the help it can get.