The State of the UK Steel Industry

Recent Events

The UK’s steel companies have been cutting jobs and closing down for several years. The trouble began when the UK’s largest steel company, Tata Steel, cut 1,500 jobs in 2011. It continued to cut more jobs over the next few years, as did Thamesteel and several other companies. The problem reached its peak in the early months of 2016, when Tata Steel and several other businesses began to sell off their assets in the UK. The trend is continuing, and at present the industry shows no signs of recovery.

Why is it Shrinking?

Many people in the UK are trying to find a single cause for the problems, but the reality is that multiple factors are contributing to it. Some of the problems are political in nature, but others are tied to changes in the global economy.

Demand for steel fell all over the world due to the recent financial crisis, and it has not recovered. The reduced demand caused the value of steel to plummet, which has threatened the bottom line for most steel companies. Many of the world’s companies have survived, which indicates that this is note the sole factor that caused the UK’s industry to collapse, but falling demand laid the foundation that the other problems built upon.

British steel has also been suffering due to competition from foreign suppliers. The combination of China’s low labor costs and minimal environmental regulations allows the nation’s steel companies to produce their steel at a much lower cost than most British companies. That wasn’t a problem for the UK for many years, because most of China’s steel was used to fuel domestic growth. Reduced demand in China has encouraged Chinese steel companies to focus on the export market for the past few years, which has brought them into competition with British steel suppliers. British companies have difficulty competing with cheap steel from China, which has caused many of them to suffer losses. The British government has declined to regulate the steel industry to protect its own companies, and many other European nations have accused it of blocking other European efforts to do so.

Rising energy costs are the last piece of the puzzle. The steel industry is heavily reliant on fossil fuels, which have been getting more expensive in recent years. The steel companies must either pass those costs onto consumers or take the loss themselves, which gives them a choice between losing ground to cheap imported steel or cutting their profit margins down to dangerous levels. This problem is less likely to be solved than many of the others, and is one of the largest reasons that the UK’s steel industry is unlikely to recover in the near future.