RUTH SUNDERLAND: UK facing fresh steel crisis


RUTH SUNDERLAND: Steel is a strategic industry – we need a reliable domestic supply rather than depending on the vagaries of world markets

  • The troubles of Sanjeev Gupta, once hailed as the saviour of steel, risk creating a crisis right across the UK industry 
  • His Liberty operation is one of the big six producers
  • But Gupta’s ambitions have been shaken by the downfall of Greensill Capital, which he relied upon for much of the funding for his family business empire 

The troubles of Sanjeev Gupta, once hailed as the saviour of steel, risk creating a crisis right across the UK industry. 

His Liberty operation is one of the big six producers, behind Indian-owned Tata and British Steel, owned by Chinese giant Jingye. Gupta spent hundreds of millions buying up assets in locations including Scotland and Hartlepool along with the biggest site, at Rotherham, where he makes speciality steels using electric arc furnaces. 

But these grand ambitions have been shaken by the downfall of Greensill Capital, which he relied upon for much of the funding for his family business empire. The fear is that Greensill and Gupta are on a spiral of mutually assured destruction. 

Feeling the heat: Worries over Liberty Steel, which employs 3,000 in the UK, come at a time when the wider industry is facing big challenges

Feeling the heat: Worries over Liberty Steel, which employs 3,000 in the UK, come at a time when the wider industry is facing big challenges

Worries over Liberty Steel, which employs 3,000 in the UK – along with another 2,000 in Gupta engineering businesses – come at a time when the wider industry is facing big challenges. 

Liberty is not the only one with problems. Tata Steel UK, which employs 8,000, said in the autumn that the pandemic had cast significant doubt on its ability to continue. 

Hardly a good moment, then, for Gupta to have to embark on a fire sale, as has been mooted, for his British operations. Alarm bells will be ringing in Westminster, which has a recovery agenda led by infrastructure spending and a green industrial revolution. 

That may explain the way British Steel was parcelled off to Jingye around the time of the 2019 election, despite wider unease in the Tory party over China. Jingye’s investment has not panned out as hoped. It wants to invest up to £1.2billion in blast furnace technology but the spending has been put on hold because of possible future green legislation which could outlaw blast furnace steel in the UK by 2035. 

Gupta’s electric arc furnaces are a greener alternative though producers in the UK have much higher electricity costs than competitors in France and Germany. Apart from energy and climate considerations, there is the thorny issue of tariffs. A wide range of steel produced in the UK is subject to a 25 per cent export tariff to the US imposed by former president Donald Trump, which remains in place. 

The industry is also subject to 25 per cent tariffs on exports to the EU once quota limits are breached. Insiders say quotas are not being filled – though some will be – and in any case post-Brexit customs bureaucracy is adding 10 per cent to prices. Steel in the UK has lurched from crisis to crisis since the 1970s. Even so, the idea it is a sunset industry that ought to be allowed to die off is a myth. 

 It still employs around 32,000 plus another 73,700 in the supply chain, and contributes more than £9billion to the economy. Government and the rest of industry need to commit to steel. Britishvolt, for example, which is setting up a Gigafactory in Northumberland to make lithium ion batteries, has promised to use UK manufactured steel. 

Others should follow its example. There is a proud saying on Teesside, referring to the area’s heritage in iron and steel, that ‘We built the world’. 

Steel is a strategic industry, important to our security and the foundation of any economy. It will form part of the basis of our recovery. We need it to build the infrastructure promised to drive the green revolution, to renew water and sewage systems, for hospitals and medical equipment. 

How much better to have a reliable domestic supply than to be forced to rely on the vagaries of world markets.

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