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Closure of Port Talbot Blast Furnace Highlights the Limit of Government

Jonathan Edwards writes:

FUTURE historians will consider this week’s sad developments – the closure of the last remaining blast furnace at Tata Steel Port Talbot – a turning point in the UK’s industrial history.

Jonathan Edwards: Ending of virgin steel production “a seismic moment”.

With the British Steel plant at Scunthorpe also due to turn off its own blast furnace, the UK, the birthplace of the Industrial Revolution, will be left without the ability to produce its own steel. This is a seismic moment in our economic history. From here on in, the UK will be reliant upon virgin steel imports. Strategically, this leaves the British State in an exposed position on all sorts of fronts.   

This week’s development is of course primarily a tragedy for the 2,800 workers who will directly lose their jobs and those businesses further down the supply chain.  The jobs at Port Talbot were well paid in comparison to other available employment and therefore the local economy, even if workers were to find alternative jobs, direct consumer expenditure will take a hit.  The South Wales Valleys are already regrettably amongst the poorest regions of Europe.

The decision by Tata of course indicates the folly of privatising your primary industries in the first place.  Once those industries are sold then governments lose control.  Port Talbot was originally bought by Corus before being ultimately bought by Tata in 2007 meaning that the fate of the Welsh steel making was in the hands of decision makers in faraway Mumbai.  Understandably, Directors and Board Members make decision on what they perceive to be in the best interest of their company.

Port Talbot is one asset of many that Tata hold across the world and in their future business plan they no longer require primary steel making capability in Port Talbot.  Did Brexit play a role in their thinking?  The UK is no longer a part of the worlds largest economic union.  If Tata want to produce primary steel for the European market, why do it in Wales which is outside?   According to Tata, the blast furnaces were losing the company £1m a day.  The restructuring involves £1.25bn investment by the company to build an electric arc furnace, which essentially recycles steel, with construction set to begin next summer.  The UK Government will contribute £500m. 

In opposition the Labour party absolutely savaged the blueprint, yet the final plans seem to have changed little now that they are in government at UK level.   We were told in advance of the election that only a change of government could save the jobs.

No new hope: Jo Stevens talked the talk before the election but no new plan for steel emerged

Before the election, Jo Stevens MP, the then-Shadow Secretary of State for Wales, said in the Commons, “This Government has forked out £500 million taxpayers’ cash for the loss of 3,000 jobs, and this is their deal, and they own it.”   Earlier this month, the new Business and Trade Secretary of State, Jonathan Reynolds, said the Labour version of the same deal gives “hope for the future of steelmaking in South Wales.”

From what I can see it’s the same number of jobs lost for the same amount of money invested by the UK Government.   Furthermore, the Unions’ alternative proposals have not been adopted.  I am not entirely convinced the tactic of the UK Government to gloss the agreement is credible.   Perhaps they genuinely thought that their proposals would change the position of the company, if so they have been given a very rude awakening on the limit of the powers of the nation state when up against a giant company like Tata.

Plaid Cymru’s ultimate call for the Welsh Government to compulsory purchase the site also has its weaknesses.  The Welsh Government entire economic development budget for both revenue and capital is only £527m.  At a £1m a day loss, compulsory purchasing Port Talbot would wipe out 70% of the total budget without even considering the cost required to buy the plant.

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I was listening to a very interesting podcast by Irish economic David McWilliams recently where he discussed the rise of the far right AfD (Alternative for Deutschland) in Germany.  One of the main reasons of its recent electoral successes has been the decision of Volkswagen, a company that has provided well renumerated employment for the best part of a century, to start closing production capacity in Germany.  The podcast argued that the demise of the old certainties has created a climate of fear that is being exploited.

A landscape of decline: “A green industrial revolution sounds great in a pamphlet”

We are no strangers to industrial decline in Wales; however, the closure of the last steel-making blast furnace underscores that we are facing a very uncertain economic future.

Faced with global forces they cannot control, the traditional political mainstream does not have a convincing narrative of where we are heading.  Talk of a green industrial revolution sounds great in a pamphlet, but what exactly does it mean for working people in terms of employment and renumeration?

Looking at the overall strategic political position, I fear that project miserable by the UK Government could well backfire and play into the hands of the far right.  Welsh nationalism also must move beyond its default grievance narrative.  In the absence of hope for our people, malign forces will surely pounce

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