So Tata has sold the Scunthorpe steelworks (along with other sites) to Greybull Capital for the princely sum of £1. Did they not heed my sage like advice? Are they mad or am I completely wrong in thinking that this is just an exercise in futility?
The first thing I have to say about this deal is that it hasn’t been finalised. Some media reports state that the deal won’t be signed for weeks. A lot can happen in that time and I wouldn’t be surprised if it does. Don’t be shocked if the deal changes dramatically or even totally unravels before pen is set to paper.
The details about this deal are in seriously short supply. One “detail” that has been mentioned in the media is the UK government is pumping £70-100 million of our precious money into the deal as a loan. The details of this are not currently clear but it would seem the answer to my recent post asking who’d be mad enough to buy a steelworks is us (in part at least), the British taxpayers.
Why is the UK government stepping into the financial breach to provide this loan? Wasn’t the prospect of investing in the British steel industry not attractive to the banks? What do they know about this deal, and the future prospects of sites like Scunthorpe, that puts them off? I know many people have an irrational hatred of bankers and think of them as more vomit inducing than estate agents BUT they usually can smell a business rat a mile off.
So can we, the chumps who pay our taxes, look forward to writing off £100 million of our cash in a couple of years time? Maybe. I wouldn’t expect to get much of a return from this investment.
Pensions, what’s happening to the pension scheme? What kind of deal has the UK government done to sweeten this bitter steel pill to the point that Greybull have publicly taken it on? I wonder if there are more “details” yet to emerge and they might not be to everyone’s liking. Maybe we, the downtrodden British taxpayers, might be expected to shoulder more of the pension burden for steelworkers past and present? (This applies to all the remaining steel producing sites, current staff and the vast number of retired steelworkers.)
Another thing that I have heard in the media, often as a justification for our tax money being spent on this dying industrial dinosaur, is that steel is a strategic asset. I have to ask why when our technologically focused society seems more dependent on copper, plastics, semiconductors, gold, cobalt, oil and lithium (Why lithium? Take a look at your smartphone battery). Steel might have been a strategic asset a long time ago but now it is just one of many materials our society needs and it is freely available on the world market.
I’ve heard so many calls for the UK steel industry to be treated as a special case during this recent crisis. That it should be given discounts on power bills and business rates. Demands that the government should provide whatever help it can to preserve this one industry. Why? Do we, as a nation, stand or fall depending on the amount of steel we produce? No. Do other businesses, those with a much brighter future than the dinosaur that is steel making, get this kind of help? No. So why are we doing this?
The truth is that all, or nearly all, steel producing sites are in Labour constituencies. This is all about Labour trying to protect its voter base and show how nasty the Tories really are. Rationality and business sense don’t come into the equation. If it did then we’d no more protect the UK’s steel industry than a failing high street retailer or a struggling light industrial company. If, as an example, a major UK grocery retailer were to suddenly declare itself bankrupt would the UK government suddenly step into the breach and bail it out? A business employing more people than work in the UK steel producing industry? No it wouldn’t.
I think this government has been bounced into action purely in an attempt to offset its nasty image instead of being hard-headed and rational about the issues involved. That means we all lose.