A combination of fierce international competition and high domestic costs has placed many UK steel Industry in a challenging position globally.
The industrialisation of steel production, originating in the United Kingdom (UK), played a pivotal role in the Industrial Revolution. Despite early leadership in the 19th century, the UK’s global market influence in steel has declined in recent years, facing challenges such as fierce international competition and high domestic costs.
Current Challenges and Spotlight on Government Strategy
A combination of fierce international competition and high domestic costs has placed many UK steel plants in a challenging position globally. The conclusion of the Brexit transition period, the impact of the coronavirus pandemic, and an increased emphasis on steel decarbonisation have brought the Government’s strategy and policies for the steel industry into focus once again.
Scale and Contribution of the UK Steel Industry (2020)
In 2020, the UK steel industry contributed £2.0 billion to the UK economy in terms of gross value added (GVA), representing 0.1% of total UK economic output and 1.2% of manufacturing output. The industry comprises 1,100 businesses and supported 33,400 jobs in 2019, constituting 0.1% of all UK jobs.
British Steel Trade
Brexit has a significant impact on the British steel industry since it mostly relies on the exports. As of 2021, pig iron exports decreased by 73 percent year-on-year, and scrap metal sales to other countries came to nearly eight million tons in 2021, which was 746,000 less than the peak of 8.8 million metric tons recorded in the previous year. In order to support the steel industry in the country after Brexit, the British government imposed temporary tariff safeguards and investment in research and development. However, the long-term effects of these measures remain uncertain. Regarding imports, 8.12 million tons of iron ore were brought into the country in 2021, an increase compared to the previous year. That same year, pig iron imports also increased, amounting to 38,000 metric tons.
International Landscape
In 2019, the UK produced 7 million tonnes of steel, while China produced a staggering 996 million tonnes. Within the EU, the UK (then an EU member state) ranked eighth in steel production, following Germany, Italy, France, Spain, Poland, Belgium, and Austria.
Prospects and Challenges for the UK Steel Industry
A recent decline in international demand for steel, coupled with ongoing production growth, has led to a global surplus of steel, causing prices to drop. This has accentuated the cost disparity of UK-produced steel, where overheads are higher than in some other countries. The years around 2015/16 witnessed significant upheaval in the industry, marked by plant closures, mergers, and layoffs, raising concerns about the sector’s resilience and profitability.
Government Policy on Steel
The UK Government has expressed commitment to supporting and securing the future of the steel industry, considering it a “vital” sector. Measures include publishing an infrastructure pipeline, committing to support through public procurement policies, and providing compensation for energy-intensive industries. Stakeholders have called for further government support, especially on energy prices and public procurement. The Labour Party advocates for a concrete sector strategy with stronger targets and guarantees to “buy British.”
Steel Safeguards and Trade Remedies
While the UK was an EU Member State, EU trade remedies, including safeguards and anti-dumping measures, applied to certain steel imports. Some of these remedies have transitioned into the UK trade remedies system, set to expire on 30 June 2021. The Trade Remedies Authority (TRA) recommended extending some measures, leading to disappointment in the steel industry. The final decision rests with the Secretary of State for International Trade. EU steel safeguards now apply to UK exports to the EU, imposing a tariff on certain steel products above specified quotas.
