Brexit won’t save UK steel – The government could already do much more within the EU

07 Apr 2016, By Riz Hussain

Tata Steel, the second largest steel producer in Europe, employs thousands of British workers. Its plan to sell its UK assets has kicked the UK’s steel industry crisis up a gear, with up to 40,000 jobs now on the line, in Tata’s operations or in their supply chains.

This has sparked some politicians to opportunistically claim that the steel crisis could be solved if the UK was to leave the European Union. Boris Johnson said this week that the government have “supinely given up” powers to deal with the crisis in steel, due to EU membership.

This is simply not the case. What is needed to save British steel is action from the UK government. Boris may well be right that the government have given up on UK steel, but they’ve done it of their own volition. It’s hard to see how leaving the EU would spur them into actions they’re already able to take yet refusing to.

China

The UK’s steel industry has been badly hit by the dumping of cheap Chinese steel onto the European market. But being part of the EU gives us greater scope to act against dumping than the UK could probably achieve on its own.

Indeed the EU is working on trade policies to ensure a level playing field – 16 measures have been introduced specifically on Chinese imports. It’s also considering trade sanctions against China and could impose a tax on Chinese steel.

However, the UK was one of the member states that did not want higher tariffs, and is a supporter of granting China Market Economy Status (MES) in the WTO. This would make it harder for the UK to impose tariffs on unfairly priced goods, whether in the EU or not.

Many other EU member states are against granting China this status, and it would be a lot easier if they didn’t have to work against the UK government in this. Working alongside those EU countries gives us a better chance to prevent China becoming eligible to similar conditions as other WTO MES members.

Energy costs

To make steel, you need energy – lots of it. We have some of the highest energy costs in Europe. Our basic energy costs are higher, but so are taxes. That’s our own government’s decision, not the EU’s.

The TUC supports environmental taxes, but think they could be done in a much more effective way. Other EU countries cap the taxes for strategically important industries, or give large energy tax rebates where firms are investing to improve their environmental impact and reduce usage.

Public investment

EU law lays down a number of conditions in which public investment can be put forward to save an industry in difficulty. The issue is not so much that these restrict our freedom to invest, but that our government doesn’t seem to want to use the freedoms they already have.

In May 2010 the outgoing government had offered an £80m loan to develop new technologies at the Sheffield steel producer Forgemasters, without any problems from the EU, only to see this withdrawn by the newly elected coalition government.

Unions continue to call on the government to explore every option to support British steel, including direct government intervention. Other European countries have no issue with this. In Belgium, for example, the state owns shares in a steel company.

More than half of the UK’s steel exports are to the EU – a Brexit would mean an increase in British export prices, making us even less competitive. This would, in turn, mean more job losses and raised tariffs.

Yet leading members of the Conservative party on both sides of the EU debate seem unable to contemplate state interventions, instead letting UK industry suffer rather than break their ideological commitments to free markets.

Brexit can’t save our steel, only an active and long term industrial strategy from our own government can do that. It can be done inside the EU, and it needs to start now.