How to ensure Tata Steel goes to the right buyer - Tom Blenkinsop MP
Aden Simpson
| PoliticsHome
Ahead of his debate today, Labour MP Tom Blenkinsop explains to PoliticsHome why it’s in the industry’s interest to slow down the process of selling Tata Steel.
Its post-war history is littered with privatisations and renationalisations; UK steel poses some uncomfortable existential questions for the UK’s particular blend of liberalism.
When the Indian owners of Tata Steel UK put the business up for sale this year after reporting £1m daily losses, the Government hesitated before pledging a 25% equity stake in any new purchase.
Interventionists on one side say too-little-too-late, while the benign-neglectors argue this will only prolong the inevitable, even welcome, death of what is an inherently uncompetitive UK steel industry.
For many in the sector however, neither end of the spectrum has the answer, and as in several other advanced economies, UK steel could yet prevail given time, the right market indicators and ultimately, the right buyer.
“UK steel industry is not a basket case,” said Tom Blenkinsop, MP for Middlesbrough and Cleveland, “otherwise people wouldn’t be thinking about investment.”
His view was validated sevenfold yesterday when Tata steel reported they now have another five potential buyers that all think they can do better.
The Labour MP is leading a backbench debate on the topic this afternoon to ensure the right steps are taken before both Tata and the Government rush into a deal. His first concern is that the 16-week timescale is “really not sensible.”
“It’s doable, but you need more time,” he said. “The whole point in this debate is to keep pressure on the Government to keep Tata in the frame as a responsible seller. The more time you give the more likely, and more sensible the bids become, rather than fire-selling to whomever comes first. You need someone who’s going to run it properly.”
In 2006 when British steel assets were sold to Tata, they had the time allowance extended in order to allow them to purchase it; this ran over more than 12 months. Again in 2010 the sale of Redcar was slowed down to find the right buyer, while maintaining productivity, customers and jobs through the transition.
“Some people don’t even buy a house in 16 weeks,” he quipped. “Never mind an integrated steelworks with satellite sites, with 15,000 people and many millions in capital.”
Critics, and even potential bidders for Tata, complain that for UK steel to be commercially viable it will require substantial energy subsidies from the state. Again Blenkinsop maintains that acquiescing in a panic would be counterproductive and constitute a failure to understand the UK market.
One potential buyer, Liberty, has a history of operating Electro Arc mini-mills which use electricity and recycled steel, whereas as most of British product uses oxygen blast furnaces to turn iron-ore and coke into brand new steel.
The difference is the UK market relies on manufacturing making its own energy, using heat not electricity, which can be sold and used for other purposes. Conversely the electricity market in the UK is designed for consumers, not manufacturers, and is therefore incredibly expensive for industrial use.
“Energy is a side issue to how a blast furnace operates,” he said, “you create energy to make your product.”
Another commercial concern is that competition from emerging economies with lower wage bills will continue, and only get worse as they increase their output.
“Saying they’re increasing steel production is an irrelevant statement: Is it rebar? Slab, long product, rail, is it strip? What weight is it? What’s the alloy content? There’s a lack of chemical engineering expertises in these markets. To say extra steel production will be a problem means nothing.”
For this reason, Blenkinsop argues the viability of UK steel relies on R&D, an area in which the UK is internationally renowned, if not by the current Government. “Steel evolves” he says, “the steel we use now didn’t exist ten years ago.”
Laboratories work in conjunction with each blast furnace evolving the metalogy of steel and designing new product which is then mass produced. The whole UK sector, not one company, benefits from this R&D.
The Material Processing Institute in Grangetown is one example, a not for profit organisation with the aim of attracting capital investment to the UK because they’re based here, but is starved of even paltry funding.
“The viability of the MPI is so strong that even Swedish and German governments have approached MPI, to pay them to set up something similar in Sweden and Germany, because they can see the future of R&D in the steel sector. But our own government won’t pay for it.”
R&D is relatively inexpensive, he argues. Something in the order of £5m that was given as a catapult for Rolls Royce would go a very long way, and pales in comparison to what the Government is currently considering to help attract a buyer.
“The UK Government, hasn’t pursued it,” Blenkinsop added, “that’s a decision coming from InnovateUK and BIS, so we want to explore that as well. It isn’t just about retaining the assets we have. If we want to maintain what market share we have, and acquire more, we need to be ahead of our competitors.”
“It’s all very well putting down plans or advertising for potential buyers to take on board a very complicated setup like Port Talbot, without R&D backup. We need a proper industrial strategy set down by the Government which gives the market the indicators to invest.”
