If we go back into history, Britain used to be the largest steel producer 100 years back. Now, it seems to be a completely different story altogether as China has surpassed Britain in many aspects, including the steel industry.
The steel industry in the UK has shown a significant decline in the past 20 years which makes people wonder whether it could become a prosperous infrastructure provider in Britain again. In 1997, the steel industry employed 38,000 employees, while in 2014, there was a massively evident decline, with only 18,000 people employed. A further 6,000 people are currently under threat.
There are many factors which could be identified with the downfall of the UK steel industry, factors such as globalisation. The research manager at the commodities analyst CRU, Chris Houlden said, “The issue facing UK steel has been developing since the financial crisis. Demand for steel in Britain and the EU has fallen and not recovered and there's persistent global overcapacity.”
Britain's steel industry is also suffering due to cheap Chinese imports, with high electricity prices caused by green levies, as well as the strong British currency. China have heavily invested in the steel industry and are now responsible of a large portion of the world's steel output.
However, there have been many criticism on China's mills for dumping their excess output, while its overcapacity has been estimated to be 250m tonnes a year. The European editor at the steel industry data provider Platts, Peter Brennan said, “China's production is not abating. You might have thought they would cut capacity, but in a country where industry is effectively government-controlled it's not happened. In what's arguably a more unstable society, the government has no intention of cutting masses of jobs.”
China's President, Xi Jinping is currently on a state visit in the United Kingdom. Prime Minister, David Cameron will be speaking to the Chinese President about the steel industry, highlighting the concern over steel dumping. David Cameron mentioned in the Commons, “Of course, we'll raise all these issues. That is what our relationship with China is all about.”
Evidently, the steel crisis has inflicted a big toll on Britain and on notable steel companies. One prime example of the downfall is Caparo Industries.
Labour peer Lord Swraj Paul's Caparo Industries, which is a major producer of steel products, with as many as 1,800 staff across 20 sites has fallen prey to Britain's steel industry crisis. Caparo received a fresh blow as 16 out of the 20 business went into administration.
It was suggested that Lord Paul had recently been looking for funding options, although he is considered as one of the 50 richest people in Britain, with an estimated fortune of £2 billion.
PwC were appointed as administrator to Caparo Industries and its 16 businesses in the UK, on Monday 19th October. PwC are now looking into selling, restructuring or closing the businesses down.
After moving to Britain, Indian-born Swraj Paul founded Caparo in the 1960s. He first started off with a company which made pipes for the gas industry. It eventually evolved and became an international business which operated in the UK, Europe, the USA, as well as India, with an annual turnover of £1 billion.
Caparo's global business is not limited to steel; it is also involved in material testing services, hotels, product development, media, interior and furniture design, as well as financial services and energy.
What comes as another blow is that the Indian-owned company Tata, has decided to cut back its UK operations. Tata Steel announced that there will be nearly 1,200 job losses in its Lanarkshire and Scunthorpe plants.
