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ABC News
5 days ago
- Business
- ABC News
'What choice do we have?': SA Premier grapples with mounting demands for taxpayer bailouts
Who deserves a lifeline? That's the awkward question Premier Peter Malinauskas has been fielding during an eventful first week back from annual leave. In the government's view, the Whyalla steelworks and its more than 1,000 employees certainly fall into the deserving category. On Wednesday, the Premier announced the state government would stump up another $137.5 million to keep the steelworks running through its government-enforced administration process. That's on top of $192 million the government had already allocated to keep the steelworks afloat, bringing the total state contribution to $329.5 million. The Commonwealth has pledged an equal amount. Wednesday's extra funding, while lower than expected, is still a hefty chunk for a state government that's flagged it has limited capacity to fund major projects due to rising debt levels. And the steelworks are not the only ones in need of help. The Port Pirie lead smelter, which employs about 900 people on the Spencer Gulf, is losing tens of millions of dollars a month, according to owner Nyrstar Australia. The company, which also owns a zinc smelter in Hobart, is negotiating with the state and federal governments over a support package that could be worth hundreds of millions of dollars. Then, on Thursday, it was revealed SA's largest disability employment provider, Bedford Industries, was on the brink of administration — raising fears for the future of 1,400 people with disability. In both situations, the SA Premier has indicated the state government is ready to help with public money if need be. But does this set a precedent for every business or industry that is struggling? Asked this on Wednesday, the Premier said: "Well, what choice do we have?" "I think we have to be balanced and careful in the approach that we take and deliberate in our considerations," he said. "But I don't think there's anybody seriously suggesting that we should allow Port Pirie or Whyalla or our farmers or for people operating our coastline [affected by the algal bloom] just to be left to rack and ruin — that's not my view. "Governments have always played a role. Whenever there's been a crisis or a challenge, people turn to government, and that's a responsibility you have to be willing to take on." On Friday, after the Bedford situation came to light, Mr Malinauskas said: 'It's not my DNA just to sit back and watch a group of vulnerable people potentially be left in a situation where they're more vulnerable than they are already". James Hancock, deputy director of the University of Adelaide's SA Centre for Economic Studies, said the situations with Whyalla, Port Pirie and Bedford had left the government "between a rock and a hard place". He said government intervention to save a business meant "you then potentially have a queue of other businesses approaching you for support when they're in difficulty". "The state budget can afford to do it for an extended period, but the real issue is if you're doing this for an extended period, what are you doing for other sectors that come under pressure?" he said. "If it's not just Whyalla [and] you sort of end up with five, 10 sectors that need a lot of help on an ongoing basis, then that actually starts to become a really large budget burden. "There's a tension there and there's no easy answer." South Australia is not short of examples of what happens when a long-standing industry collapses and there is no white knight to save it. The death of the car manufacturing industry left its mark on Adelaide following the closure of Mitsubishi in 2008 and Holden in 2017. Meanwhile, the end of coal mining in Leigh Creek in 2015 saw that town's population shrink from 2,000 residents to just 100. Mr Hancock said the stakes were particularly high for regional cities that were reliant on a major employer. "Holden was located in the Adelaide metropolitan area … and people that were displaced from Holden in many instances were able to get employment elsewhere," he said. "If you think about the house values of those workers, there was no sort of real impact of any significance. "If you compare that with Whyalla, and if you had a situation where half the town was out of work and having to leave a job, it becomes almost impossible for people to sell housing. "The human consequences of a Whyalla closure would really be very large." That's the case Port Pirie Mayor Leon Stephens is now making amid the troubles associated with the Nyrstar plant. Mr Stephens, who is also a Liberal Party candidate at the 2026 state election, said the closure of the Port Pirie smelter would cause economic "devastation". "My perception of what a government should be doing, it should be looking after all sectors of community," he said. "When you've got … a major employer in a city and that person is struggling and it looks like it will bring the city to its knees, I think there's definitely a catalyst [for intervention]." The Premier was asked on Wednesday where he drew the line on whether to give an industry a bailout. He said it depended on "whether or not there's a future" for the industry in question. "While it is true that there's creative disruption in the marketplace all the time and we see businesses that's better years are past, the question is what are the years in front of us," he said. "Unless you can see a future, then maybe you have to say, 'look, something hit the fence and that's life'. "But for steelmaking … we know this country needs steel, for critical minerals [like at Port Pirie], the demand is going up not down. "So, there are futures there that are worthy of contemplation."
ABC News
23-07-2025
- Business
- ABC News
Whyalla steelworks costing less than anticipated to run, but extra $275m still needed
The South Australian government says it will not have to spend as much money as it initially planned to keep the Whyalla steelworks operating through administration, with a $384 million contingency fund revised down to $275 million. As part of an initial $2.4 billion Whyalla rescue package announced in February, the state and federal governments set aside $384 million — split 50/50 — to cover the costs of running the steelworks while they were prepared for sale. But that initial funding was quickly expanded due to the poor condition of the facility, with steelworks administrators KordaMentha flagging earlier this year that it would run out of money by August. Today, the state and federal governments announced they would allocate a further $275 million — also split 50/50 — to keep the steelworks running. This second tranche of funding was initially budgeted at $384 million. But the state government said it was able to revise this down to $275 million because the steelworks were becoming cheaper to run. "The reason for that is that the business is progressively getting back onto a better footing," Premier Peter Malinauskas said on Wednesday. The Malinauskas government tipped the Whyalla steelworks into administration on February 19, stripping ownership of the asset from British industrialist Sanjeev Gupta's GFG Alliance over concerns about underinvestment and a lack of maintenance. The $275 million announced today brings the total amount of public money allocated to keeping the steelworks running to $659 million. Mr Malinauskas said he remained confident the administration would take 18 months, meaning the steelworks would be under new ownership in the second half of 2026. But he did not guarantee that more money would not be needed to keep the steelworks operating. "While it is true that we're a lot more confident about Whyalla's future today than what we were even after the intervention we made, it's also true though that there's a lot more work to be done and there are no guarantees throughout this process," he said. "We budget for what we forecast to be expected, to do better than that is always welcome, but we're not naive to the fact that this still has a long way to go." The extra funding has prompted fresh scrutiny on how long the steelworks administration will take and what the final public cost will be. Daniel Rossetto, from the University of Adelaide's Institute for Sustainability, Energy and Resources, said it was important the public was given an understanding as to "what is the limit of this type of subsidy". Dr Rossetto suggested the Whyalla intervention could also set a precedent, particularly amid the ongoing challenges associated with the smelting industry in Port Pirie and Hobart. "If you're a community, a vulnerable community somewhere else in Australia, and you look at this and say, 'what's so special about Whyalla, why can't our community receive that sort of money as well?'" he said. "So, then you start to raise expectations in the community about the government's appetite to basically subsidise communities that are involved in industries that are in decline. "For the general public … they should certainly be asking questions about what is the value for money of putting this type of hundreds of millions of dollars into this project when there must be 50 or 100 other competing projects around the country who may also feel like they're in need of some funding too." Opposition spokesperson for government accountability Ben Hood said the Liberal Party supported the state and federal government's $2.4 billion sovereign steelmaking package. But he added that "South Australian taxpayer money cannot be used as a blank cheque". "How much more money does the Premier have to utilise from South Australian taxpayers?" he asked. "He needs to explain how long this is going to take and how much it's going to cost until they find a buyer." The Premier said the state government was "absolutely" justified in allocating nearly $660 million to keep the steelworks afloat. "What you have to contemplate is the counterfactual," he said. "Because everything we have learned through the administration process since the intervention is this business wasn't just potentially going to die, it was in the process of dying if not dead already. "That would mean the total collapse of … long-form steelmaking in this country, it would mean the end of Whyalla, it would mean the end of being able to produce rail and structural steel for ourselves. "That would be a pretty dark day not just for Whyalla and our state but for the nation, and the costs associated with that make this investment look very small indeed." KordaMentha formally opened the sales process for the Whyalla steelworks on June 24. At the time the state government said there were "at least 33" potential buyers for the steelworks, with 60 per cent of those coming from overseas. Mr Malinauskas said the number of interested buyers would "start to whittle away" when the formal expression of interest process closed on August 1. "We don't want someone to take this over who can afford to buy it and then do nothing with it," he said. "We need someone who can afford to take over the steelworks and then dramatically invest in." KordaMentha has been using part of the $384 million in administration funding to do maintenance work to bring the steelworks back into a state suitable for sale. After being installed administrators in February, the firm said it was "shocked" by the lack of maintenance at the facility, describing it as being in a "state of disrepair". It also revealed OneSteel Manufacturing, the GFG Alliance subsidiary that was running the steelworks, was losing $1.5 million a day before going into administration.
Yahoo
13-07-2025
- Business
- Yahoo
Trump's tariffs are looming large over the UK's last surviving steel towns
Ryan Davies worked at the Port Talbot steelworks for 33 years and from his very first day, he heard rumours that the plant was on the verge of closing. Whispers would spread among his colleagues about new ownership and redundancies. Usually, they weren't true. "You took it with a pinch of salt," he recalls. It was an exhausting job. He remembers the clanging of metal and the high-pitched whining of steam, as well as the fear of gas leaks. In the summer it became "excruciatingly" hot inside the plant and his shifts lasted 12 hours. But he also valued his job. Being a steelworker was part of his identity. Then, a few years ago, he heard a new rumour: that Tata Steel, the plant's Indian owners, was to close its blast furnaces. This one turned out to be true. The two furnaces were switched off in July and September last year, part of a restructure that would ultimately remove around 2,000 jobs, half of the number employed there. "It was the end of it all - the end of 100 years of steelmaking in Port Talbot," says Mr Davies, who took voluntary redundancy in November. He is 51 now and unsure about his own future, and what the news means for his wife and his 19-year-old daughter. But he also worries deeply about Port Talbot. Steel is integral to the town's identity. The bronze-coloured chimneys loom across the skyline; the first thing you see as you drive towards the town from the M4. Steel, Mr Davies says, was "the whole reason Port Talbot was ever a successful town". It is a similar story across the handful of other British communities that historically relied on steelmaking as a source of employment. As well as Port Talbot, they include places like Redcar in North Yorkshire and Scunthorpe in Lincolnshire. At its peak around 1970, the UK's steel industry produced more than 26 million tonnes of steel each year and employed more than 320,000 people. Then came the long decline. Now just four million tonnes are produced each year, with fewer than 40,000 employed. But in the last few years, the industry has entered a particularly difficult period, thanks in part to rising energy prices. The ongoing uncertainty about tariffs on steel exports to the US is not helping. This has frayed nerves and cost the UK steel industry orders from US companies, according to steel industry executives. While 27.5% tariffs on cars were reduced to 10% and tariffs on aerospace products were lowered to zero, a 25% tariff on UK steel and aluminium exports to the US is still in place. British officials say they are determined to reduce steel tariffs to zero too, and talks are ongoing. But this all adds to a sense of foreboding on the ground in steel towns. So, what comes next if UK steel manufacturing really does near extinction? And where does that leave places like Port Talbot and Redcar that have so much of their identity bound up in their industrial history? If you want to peer into a post-steel future, look at Redcar on the northeast coast - an area sometimes described as Britain's "rust belt", owing to the derelict industrial sites scattered across the landscape. Teesside's steel industry emerged in the mid-19th Century and went on to employ more than 40,000 people. It has long been a point of local pride that the Sydney Harbour Bridge was built from Teesside steel. But along with other steel towns, it suffered in the latter half of the 20th Century. Cheap imports from China created tough competition. Britain moved from a manufacturing to a service-based economy - and towns like Redcar were left behind. In 1987, Margaret Thatcher walked with a handbag through a nearby derelict wasteland; a photograph of the "wilderness" visit became a symbol of industrial hardship. More recently, the steel industry has struggled under the weight of the UK's relatively high energy prices (which makes it expensive to heat a furnace). Some analysts also say that the UK's drive towards decarbonisation is raising costs for steel producers. In 2015, the Thai owners of Redcar's steelworks pulled the plug. Sue Jeffrey, then Labour leader of Redcar Council, remembers watching the blast furnace in action, on one of its final days in use. "It was one of the most devastating things I've been involved in," she recalls. About 2,000 workers lost their jobs at the site, with thousands more affected through the steel supply chain. Local businesses were hit too; B&Bs have lost custom from the contractors no longer visiting the area. The council set up a task force to help former steelworkers into new jobs. It saw some success. Of the more than 2,000 steelworkers who made an initial claim for benefits when the plant closed, the vast majority had come off benefits within three years, according to a council report published in 2018. But Ms Jeffrey argues that many could not find jobs that made use of their industrial skills. Some became dog walkers and decorators; others, chimney sweeps. Many, she says, accepted a large cut in salary. The same tale has been told in other steel towns; laid-off worker forced to find new jobs. Some are delighted with the change. After his redundancy, Ryan Davies decided to pursue his dream since boyhood: street art. He now runs a business, painting murals of ladybirds, ducks and mythical creatures. Though his income is lower, he finds it fulfilling. "I've been a far happier person since I left," he says. "When you've got a grey wall and you paint something colourful, it makes people smile." But not everyone is so upbeat. Cassius Walker-Hunt, 28, opened a coffee shop in Port Talbot last year after taking redundancy from the town's steelworks, using a £7,500 loan from Tata Steel to buy professional coffee-making equipment. "I've been working around the clock just to survive," he says today. The job security that steelmaking once offered is one reason unions argue it's imperative to keep the industry alive. Alun Davies, national secretary at the Community Union, the largest union for steelworkers, thinks governments should step in when required to keep blast furnaces burning. That's exactly what happened earlier this year in Scunthorpe, the last place in the UK that makes virgin steel from melting iron ore in blast furnaces. It has lurched from crisis to crisis. The last government took control when it was on the brink of going bust and - £600million of UK taxpayer support later - sold it to Chinese company Jingye. Now it is back in government control. The government was forced to intervene after Jingye failed to order vital supplies to keep the furnaces burning. From here, Scunthorpe's future is uncertain. Some have urged the Labour government to fully nationalise the site. But Jonathon Carruthers-Green, an analyst at steel consultancy MEPS International, believes that ministers will be wary of that option because of the huge potential costs and complications. How Trump is using the 'Madman Theory' to try to change the world (and it's working) The benefits U-turn raises questions about the credibility of Labour's long-term plan Britain's energy bills problem - and why firms are paid huge sums to stop producing power Alternatively, the plant could be sold to a different foreign buyer. But, asks Mr Carruthers-Green, "Who is going to come along and start making steel in the UK, where there's higher [energy] costs, where there's all sorts of issues around decarbonisation?" Scunthorpe resident, Sean Robinson, told the BBC earlier this year that he fears the town will become another steel "ghost town". Looming large over all of this is the question of what will become of Trump's tariffs and how it will impact UK steel. The good news is that the UK was exempted from a surprise hike on those tariffs from 25 to 50% last month, and trade officials seem confident that they will also be unaffected by the new deferred date of 1 August, which is when the White House says its most swingeing tariffs on US trading partners will come into effect. But steel companies are still frustrated that the original plan to reduce tariffs on UK steel to zero is yet to be agreed. There are two sticking points. The first, according to steel industry sources, is that US trade negotiators are overwhelmed with the sheer volume of work to get through when negotiating with the rest of the world simultaneously. But the second, and the reason steel was not waved through alongside cars and planes, is that there are concerns in the US that the UK's largest steel maker Tata no longer makes steel from scratch. Having closed its blast furnaces, it no longer "melts and pours" the steel but rather imports virgin steel from India to be modified in the UK, leading to some questions in the US as to whether it even counts as UK steel. Even if and when a zero-tariff deal is done on steel, it is likely to include quotas above which tariffs will be charged, putting a ceiling on future growth in exports to the US. There is, however, a bigger, more profound question that steel towns must wrestle with. In a post-industrial age, what exactly are these places for? And, should they try to reignite the embers of their dying steel trade - or pivot to a new industry of the future? Some trade union leaders maintain that steel towns can, in effect, remain steel towns. With the right investment in green technologies, Mr Davies of the Community Union thinks, a new, cleaner steel industry could emerge. "Imagine Port Talbot without any steelworkers - it's unthinkable," he says. But others think that view is unrealistic. Paul Swinney, a director at the Centre for Cities think tank, argues that there is a certain romanticism in the debate around steel that blocks sensible thinking. "I think it's wrapped up in what some people perceive as being 'good jobs,'" he says. "You did a hard day's graft, you got your hands dirty, and you felt like you'd contributed. [But that framing] just isn't helpful." As he sees it, "there's no plausible route forward which is going to have more of these kinds of jobs. "The UK economy has changed," he argues. Instead, he believes towns like Port Talbot and Redcar should look to industries of the future. Redcar is already taking steps in this direction. The derelict land that once housed the town's steelworks is now at the centre of an ambitious redevelopment led by the South Tees Development Corporation. The old steelmaking structures have been flattened to make way for renewable energy and carbon capture and storage. The managers of the Teesworks project say they have created more than 2,000 "long-term" jobs - and they hope to create 20,000 in total. But last year, a central government review criticised "inappropriate decisions and a lack of transparency" at the corporation, and looked at why private property developers had ended up owning a large amount of the site. Tees Valley Conservative Mayor Lord Houchen, who at that point chaired the corporation, said he "welcomed" the panel's recommendations to improve transparency. Speaking on local radio in May, he said the Teesworks project has provided "billions of pounds of investment for the region". But Mr Swinney of Centre for Cities says we need to think bigger still. Rather than trying to recreate their industrial glory, steel towns may want to lean into white-collar, knowledge economy jobs - the sort of work that made many city centres comparatively rich. The key is to improve transport from steel towns to cities, where office jobs tend to be located, he says. But ex-steelworker Ryan Davies laughs at the suggestion of steelworkers slipping seamlessly into office jobs. "When you come from an environment of 33 years of steelworking, going into an office is such a radical difference," he says. There are other challenges too: people in steel towns tend to have fewer formal qualifications - often essential for office work. For example, about 37% of working-age adults in Port Talbot have the equivalent of one year of university education, versus a UK average of 49%. Ultimately, the future of these towns may rest on the wider fate of the UK's steel industry. And there is some cause for optimism. The government insists that Scunthorpe and the rest of the UK steel industry has a future, not least because of the big increase in spending on a steel-intensive defence industry. Mr Carruthers-Green thinks that the UK's decarbonisation drive could also eventually play to steel's advantage. With more investment in green energy, he says, there will be further demand for the sort of high-quality steel used in things like wind turbines. This, in turn, creates more energy, lowering prices for steel producers. "The hope is we can get into this virtuous spiral," he adds. Gareth Stace, director general of the trade group UK Steel, is a little more cautious, however. There's a "worst case" scenario where the UK "continue[s] to make less and less and less, he argues. As he puts it, "We don't go out of business in one bang". Instead, there's a slow death. Yet he also believes that with some tailored policies, steel could be revived even in this scenario. In particular, he wants to see action on energy prices, as well as policies on procurement in which government departments buy more steel from the UK instead of from abroad. "If it works," he says, "for the first time in a very, very long time, we'll actually have some hope for the future." Additional reporting: David Macmillan BBC InDepth is the home on the website and app for the best analysis, with fresh perspectives that challenge assumptions and deep reporting on the biggest issues of the day. And we showcase thought-provoking content from across BBC Sounds and iPlayer too. You can send us your feedback on the InDepth section by clicking on the button below.
Yahoo
13-07-2025
- Business
- Yahoo
Trump's tariffs are looming large over the UK's last surviving steel towns
Ryan Davies worked at the Port Talbot steelworks for 33 years and from his very first day, he heard rumours that the plant was on the verge of closing. Whispers would spread among his colleagues about new ownership and redundancies. Usually, they weren't true. "You took it with a pinch of salt," he recalls. It was an exhausting job. He remembers the clanging of metal and the high-pitched whining of steam, as well as the fear of gas leaks. In the summer it became "excruciatingly" hot inside the plant and his shifts lasted 12 hours. But he also valued his job. Being a steelworker was part of his identity. Then, a few years ago, he heard a new rumour: that Tata Steel, the plant's Indian owners, was to close its blast furnaces. This one turned out to be true. The two furnaces were switched off in July and September last year, part of a restructure that would ultimately remove around 2,000 jobs, half of the number employed there. "It was the end of it all - the end of 100 years of steelmaking in Port Talbot," says Mr Davies, who took voluntary redundancy in November. He is 51 now and unsure about his own future, and what the news means for his wife and his 19-year-old daughter. But he also worries deeply about Port Talbot. Steel is integral to the town's identity. The bronze-coloured chimneys loom across the skyline; the first thing you see as you drive towards the town from the M4. Steel, Mr Davies says, was "the whole reason Port Talbot was ever a successful town". It is a similar story across the handful of other British communities that historically relied on steelmaking as a source of employment. As well as Port Talbot, they include places like Redcar in North Yorkshire and Scunthorpe in Lincolnshire. At its peak around 1970, the UK's steel industry produced more than 26 million tonnes of steel each year and employed more than 320,000 people. Then came the long decline. Now just four million tonnes are produced each year, with fewer than 40,000 employed. But in the last few years, the industry has entered a particularly difficult period, thanks in part to rising energy prices. The ongoing uncertainty about tariffs on steel exports to the US is not helping. This has frayed nerves and cost the UK steel industry orders from US companies, according to steel industry executives. While 27.5% tariffs on cars were reduced to 10% and tariffs on aerospace products were lowered to zero, a 25% tariff on UK steel and aluminium exports to the US is still in place. British officials say they are determined to reduce steel tariffs to zero too, and talks are ongoing. But this all adds to a sense of foreboding on the ground in steel towns. So, what comes next if UK steel manufacturing really does near extinction? And where does that leave places like Port Talbot and Redcar that have so much of their identity bound up in their industrial history? If you want to peer into a post-steel future, look at Redcar on the northeast coast - an area sometimes described as Britain's "rust belt", owing to the derelict industrial sites scattered across the landscape. Teesside's steel industry emerged in the mid-19th Century and went on to employ more than 40,000 people. It has long been a point of local pride that the Sydney Harbour Bridge was built from Teesside steel. But along with other steel towns, it suffered in the latter half of the 20th Century. Cheap imports from China created tough competition. Britain moved from a manufacturing to a service-based economy - and towns like Redcar were left behind. In 1987, Margaret Thatcher walked with a handbag through a nearby derelict wasteland; a photograph of the "wilderness" visit became a symbol of industrial hardship. More recently, the steel industry has struggled under the weight of the UK's relatively high energy prices (which makes it expensive to heat a furnace). Some analysts also say that the UK's drive towards decarbonisation is raising costs for steel producers. In 2015, the Thai owners of Redcar's steelworks pulled the plug. Sue Jeffrey, then Labour leader of Redcar Council, remembers watching the blast furnace in action, on one of its final days in use. "It was one of the most devastating things I've been involved in," she recalls. About 2,000 workers lost their jobs at the site, with thousands more affected through the steel supply chain. Local businesses were hit too; B&Bs have lost custom from the contractors no longer visiting the area. The council set up a task force to help former steelworkers into new jobs. It saw some success. Of the more than 2,000 steelworkers who made an initial claim for benefits when the plant closed, the vast majority had come off benefits within three years, according to a council report published in 2018. But Ms Jeffrey argues that many could not find jobs that made use of their industrial skills. Some became dog walkers and decorators; others, chimney sweeps. Many, she says, accepted a large cut in salary. The same tale has been told in other steel towns; laid-off worker forced to find new jobs. Some are delighted with the change. After his redundancy, Ryan Davies decided to pursue his dream since boyhood: street art. He now runs a business, painting murals of ladybirds, ducks and mythical creatures. Though his income is lower, he finds it fulfilling. "I've been a far happier person since I left," he says. "When you've got a grey wall and you paint something colourful, it makes people smile." But not everyone is so upbeat. Cassius Walker-Hunt, 28, opened a coffee shop in Port Talbot last year after taking redundancy from the town's steelworks, using a £7,500 loan from Tata Steel to buy professional coffee-making equipment. "I've been working around the clock just to survive," he says today. The job security that steelmaking once offered is one reason unions argue it's imperative to keep the industry alive. Alun Davies, national secretary at the Community Union, the largest union for steelworkers, thinks governments should step in when required to keep blast furnaces burning. That's exactly what happened earlier this year in Scunthorpe, the last place in the UK that makes virgin steel from melting iron ore in blast furnaces. It has lurched from crisis to crisis. The last government took control when it was on the brink of going bust and - £600million of UK taxpayer support later - sold it to Chinese company Jingye. Now it is back in government control. The government was forced to intervene after Jingye failed to order vital supplies to keep the furnaces burning. From here, Scunthorpe's future is uncertain. Some have urged the Labour government to fully nationalise the site. But Jonathon Carruthers-Green, an analyst at steel consultancy MEPS International, believes that ministers will be wary of that option because of the huge potential costs and complications. How Trump is using the 'Madman Theory' to try to change the world (and it's working) The benefits U-turn raises questions about the credibility of Labour's long-term plan Britain's energy bills problem - and why firms are paid huge sums to stop producing power Alternatively, the plant could be sold to a different foreign buyer. But, asks Mr Carruthers-Green, "Who is going to come along and start making steel in the UK, where there's higher [energy] costs, where there's all sorts of issues around decarbonisation?" Scunthorpe resident, Sean Robinson, told the BBC earlier this year that he fears the town will become another steel "ghost town". Looming large over all of this is the question of what will become of Trump's tariffs and how it will impact UK steel. The good news is that the UK was exempted from a surprise hike on those tariffs from 25 to 50% last month, and trade officials seem confident that they will also be unaffected by the new deferred date of 1 August, which is when the White House says its most swingeing tariffs on US trading partners will come into effect. But steel companies are still frustrated that the original plan to reduce tariffs on UK steel to zero is yet to be agreed. There are two sticking points. The first, according to steel industry sources, is that US trade negotiators are overwhelmed with the sheer volume of work to get through when negotiating with the rest of the world simultaneously. But the second, and the reason steel was not waved through alongside cars and planes, is that there are concerns in the US that the UK's largest steel maker Tata no longer makes steel from scratch. Having closed its blast furnaces, it no longer "melts and pours" the steel but rather imports virgin steel from India to be modified in the UK, leading to some questions in the US as to whether it even counts as UK steel. Even if and when a zero-tariff deal is done on steel, it is likely to include quotas above which tariffs will be charged, putting a ceiling on future growth in exports to the US. There is, however, a bigger, more profound question that steel towns must wrestle with. In a post-industrial age, what exactly are these places for? And, should they try to reignite the embers of their dying steel trade - or pivot to a new industry of the future? Some trade union leaders maintain that steel towns can, in effect, remain steel towns. With the right investment in green technologies, Mr Davies of the Community Union thinks, a new, cleaner steel industry could emerge. "Imagine Port Talbot without any steelworkers - it's unthinkable," he says. But others think that view is unrealistic. Paul Swinney, a director at the Centre for Cities think tank, argues that there is a certain romanticism in the debate around steel that blocks sensible thinking. "I think it's wrapped up in what some people perceive as being 'good jobs,'" he says. "You did a hard day's graft, you got your hands dirty, and you felt like you'd contributed. [But that framing] just isn't helpful." As he sees it, "there's no plausible route forward which is going to have more of these kinds of jobs. "The UK economy has changed," he argues. Instead, he believes towns like Port Talbot and Redcar should look to industries of the future. Redcar is already taking steps in this direction. The derelict land that once housed the town's steelworks is now at the centre of an ambitious redevelopment led by the South Tees Development Corporation. The old steelmaking structures have been flattened to make way for renewable energy and carbon capture and storage. The managers of the Teesworks project say they have created more than 2,000 "long-term" jobs - and they hope to create 20,000 in total. But last year, a central government review criticised "inappropriate decisions and a lack of transparency" at the corporation, and looked at why private property developers had ended up owning a large amount of the site. Tees Valley Conservative Mayor Lord Houchen, who at that point chaired the corporation, said he "welcomed" the panel's recommendations to improve transparency. Speaking on local radio in May, he said the Teesworks project has provided "billions of pounds of investment for the region". But Mr Swinney of Centre for Cities says we need to think bigger still. Rather than trying to recreate their industrial glory, steel towns may want to lean into white-collar, knowledge economy jobs - the sort of work that made many city centres comparatively rich. The key is to improve transport from steel towns to cities, where office jobs tend to be located, he says. But ex-steelworker Ryan Davies laughs at the suggestion of steelworkers slipping seamlessly into office jobs. "When you come from an environment of 33 years of steelworking, going into an office is such a radical difference," he says. There are other challenges too: people in steel towns tend to have fewer formal qualifications - often essential for office work. For example, about 37% of working-age adults in Port Talbot have the equivalent of one year of university education, versus a UK average of 49%. Ultimately, the future of these towns may rest on the wider fate of the UK's steel industry. And there is some cause for optimism. The government insists that Scunthorpe and the rest of the UK steel industry has a future, not least because of the big increase in spending on a steel-intensive defence industry. Mr Carruthers-Green thinks that the UK's decarbonisation drive could also eventually play to steel's advantage. With more investment in green energy, he says, there will be further demand for the sort of high-quality steel used in things like wind turbines. This, in turn, creates more energy, lowering prices for steel producers. "The hope is we can get into this virtuous spiral," he adds. Gareth Stace, director general of the trade group UK Steel, is a little more cautious, however. There's a "worst case" scenario where the UK "continue[s] to make less and less and less, he argues. As he puts it, "We don't go out of business in one bang". Instead, there's a slow death. Yet he also believes that with some tailored policies, steel could be revived even in this scenario. In particular, he wants to see action on energy prices, as well as policies on procurement in which government departments buy more steel from the UK instead of from abroad. "If it works," he says, "for the first time in a very, very long time, we'll actually have some hope for the future." Additional reporting: David Macmillan BBC InDepth is the home on the website and app for the best analysis, with fresh perspectives that challenge assumptions and deep reporting on the biggest issues of the day. And we showcase thought-provoking content from across BBC Sounds and iPlayer too. You can send us your feedback on the InDepth section by clicking on the button below.
BBC News
12-07-2025
- Business
- BBC News
Trump's tariffs add to fears in the UK's struggling steel towns
Ryan Davies worked at the Port Talbot steelworks for 33 years and from his very first day, he heard rumours that the plant was on the verge of closing. Whispers would spread among his colleagues about new ownership and redundancies. Usually, they weren't true."You took it with a pinch of salt," he was an exhausting job. He remembers the clanging of metal and the high-pitched whining of steam, as well as the fear of gas leaks. In the summer it became "excruciatingly" hot inside the plant and his shifts lasted 12 hours. But he also valued his job. Being a steelworker was part of his a few years ago, he heard a new rumour: that Tata Steel, the plant's Indian owners, was to close its blast furnaces. This one turned out to be true. The two furnaces were switched off in July and September last year, part of a restructure that would ultimately remove around 2,000 jobs, half of the number employed there. "It was the end of it all - the end of 100 years of steelmaking in Port Talbot," says Mr Davies, who took voluntary redundancy in November. He is 51 now and unsure about his own future, and what the news means for his wife and his 19-year-old daughter. But he also worries deeply about Port Talbot. Steel is integral to the town's identity. The bronze-coloured chimneys loom across the skyline; the first thing you see as you drive towards the town from the M4. Steel, Mr Davies says, was "the whole reason Port Talbot was ever a successful town".It is a similar story across the handful of other British communities that historically relied on steelmaking as a source of employment. As well as Port Talbot, they include places like Redcar in North Yorkshire and Scunthorpe in Lincolnshire. At its peak around 1970, the UK's steel industry produced more than 26 million tonnes of steel each year and employed more than 320,000 people. Then came the long decline. Now just four million tonnes are produced each year, with fewer than 40,000 in the last few years, the industry has entered a particularly difficult period, thanks in part to rising energy prices. The ongoing uncertainty about tariffs on steel exports to the US is not helping. This has frayed nerves and cost the UK steel industry orders from US companies, according to steel industry executives. While 27.5% tariffs on cars were reduced to 10% and tariffs on aerospace products were lowered to zero, a 25% tariff on UK steel and aluminium exports to the US is still in officials say they are determined to reduce steel tariffs to zero too, and talks are ongoing. But this all adds to a sense of foreboding on the ground in steel what comes next if UK steel manufacturing really does near extinction? And where does that leave places like Port Talbot and Redcar that have so much of their identity bound up in their industrial history? The 'wilderness' ghost steel towns If you want to peer into a post-steel future, look at Redcar on the northeast coast - an area sometimes described as Britain's "rust belt", owing to the derelict industrial sites scattered across the steel industry emerged in the mid-19th Century and went on to employ more than 40,000 people. It has long been a point of local pride that the Sydney Harbour Bridge was built from Teesside along with other steel towns, it suffered in the latter half of the 20th Century. Cheap imports from China created tough competition. Britain moved from a manufacturing to a service-based economy - and towns like Redcar were left behind. In 1987, Margaret Thatcher walked with a handbag through a nearby derelict wasteland; a photograph of the "wilderness" visit became a symbol of industrial hardship. More recently, the steel industry has struggled under the weight of the UK's relatively high energy prices (which makes it expensive to heat a furnace). Some analysts also say that the UK's drive towards decarbonisation is raising costs for steel 2015, the Thai owners of Redcar's steelworks pulled the plug. Sue Jeffrey, then Labour leader of Redcar Council, remembers watching the blast furnace in action, on one of its final days in use. "It was one of the most devastating things I've been involved in," she 2,000 workers lost their jobs at the site, with thousands more affected through the steel supply chain. Local businesses were hit too; B&Bs have lost custom from the contractors no longer visiting the area. The council set up a task force to help former steelworkers into new jobs. It saw some success. Of the more than 2,000 steelworkers who made an initial claim for benefits when the plant closed, the vast majority had come off benefits within three years, according to a council report published in Ms Jeffrey argues that many could not find jobs that made use of their industrial skills. Some became dog walkers and decorators; others, chimney sweeps. Many, she says, accepted a large cut in same tale has been told in other steel towns; laid-off worker forced to find new are delighted with the change. After his redundancy, Ryan Davies decided to pursue his dream since boyhood: street art. He now runs a business, painting murals of ladybirds, ducks and mythical creatures. Though his income is lower, he finds it fulfilling. "I've been a far happier person since I left," he says. "When you've got a grey wall and you paint something colourful, it makes people smile."But not everyone is so Walker-Hunt, 28, opened a coffee shop in Port Talbot last year after taking redundancy from the town's steelworks, using a £7,500 loan from Tata Steel to buy professional coffee-making equipment."I've been working around the clock just to survive," he says today. The fight to keep blast furnaces burning The job security that steelmaking once offered is one reason unions argue it's imperative to keep the industry Davies, national secretary at the Community Union, the largest union for steelworkers, thinks governments should step in when required to keep blast furnaces exactly what happened earlier this year in Scunthorpe, the last place in the UK that makes virgin steel from melting iron ore in blast has lurched from crisis to crisis. The last government took control when it was on the brink of going bust and - £600million of UK taxpayer support later - sold it to Chinese company Jingye. Now it is back in government control. The government was forced to intervene after Jingye failed to order vital supplies to keep the furnaces here, Scunthorpe's future is uncertain. Some have urged the Labour government to fully nationalise the Jonathon Carruthers-Green, an analyst at steel consultancy MEPS International, believes that ministers will be wary of that option because of the huge potential costs and complications. Alternatively, the plant could be sold to a different foreign buyer. But, asks Mr Carruthers-Green, "Who is going to come along and start making steel in the UK, where there's higher [energy] costs, where there's all sorts of issues around decarbonisation?"Scunthorpe resident, Sean Robinson, told the BBC earlier this year that he fears the town will become another steel "ghost town". A question of Trump's tariffs Looming large over all of this is the question of what will become of Trump's tariffs and how it will impact UK good news is that the UK was exempted from a surprise hike on those tariffs from 25 to 50% last month, and trade officials seem confident that they will also be unaffected by the new deferred date of 1 August, which is when the White House says its most swingeing tariffs on US trading partners will come into steel companies are still frustrated that the original plan to reduce tariffs on UK steel to zero is yet to be agreed. There are two sticking points. The first, according to steel industry sources, is that US trade negotiators are overwhelmed with the sheer volume of work to get through when negotiating with the rest of the world simultaneously. But the second, and the reason steel was not waved through alongside cars and planes, is that there are concerns in the US that the UK's largest steel maker Tata no longer makes steel from scratch. Having closed its blast furnaces, it no longer "melts and pours" the steel but rather imports virgin steel from India to be modified in the UK, leading to some questions in the US as to whether it even counts as UK if and when a zero-tariff deal is done on steel, it is likely to include quotas above which tariffs will be charged, putting a ceiling on future growth in exports to the US. Is 'romanticism' blocking sensible debate? There is, however, a bigger, more profound question that steel towns must wrestle with. In a post-industrial age, what exactly are these places for? And, should they try to reignite the embers of their dying steel trade - or pivot to a new industry of the future?Some trade union leaders maintain that steel towns can, in effect, remain steel towns. With the right investment in green technologies, Mr Davies of the Community Union thinks, a new, cleaner steel industry could emerge."Imagine Port Talbot without any steelworkers - it's unthinkable," he says. But others think that view is unrealistic. Paul Swinney, a director at the Centre for Cities think tank, argues that there is a certain romanticism in the debate around steel that blocks sensible thinking."I think it's wrapped up in what some people perceive as being 'good jobs,'" he says. "You did a hard day's graft, you got your hands dirty, and you felt like you'd contributed. [But that framing] just isn't helpful."As he sees it, "there's no plausible route forward which is going to have more of these kinds of jobs. "The UK economy has changed," he he believes towns like Port Talbot and Redcar should look to industries of the future. Industries of the future Redcar is already taking steps in this direction. The derelict land that once housed the town's steelworks is now at the centre of an ambitious redevelopment led by the South Tees Development Corporation. The old steelmaking structures have been flattened to make way for renewable energy and carbon capture and managers of the Teesworks project say they have created more than 2,000 "long-term" jobs - and they hope to create 20,000 in last year, a central government review criticised "inappropriate decisions and a lack of transparency" at the corporation, and looked at why private property developers had ended up owning a large amount of the site. Tees Valley Conservative Mayor Lord Houchen, who at that point chaired the corporation, said he "welcomed" the panel's recommendations to improve transparency. Speaking on local radio in May, he said the Teesworks project has provided "billions of pounds of investment for the region".But Mr Swinney of Centre for Cities says we need to think bigger still. Rather than trying to recreate their industrial glory, steel towns may want to lean into white-collar, knowledge economy jobs - the sort of work that made many city centres comparatively key is to improve transport from steel towns to cities, where office jobs tend to be located, he says. But ex-steelworker Ryan Davies laughs at the suggestion of steelworkers slipping seamlessly into office jobs. "When you come from an environment of 33 years of steelworking, going into an office is such a radical difference," he are other challenges too: people in steel towns tend to have fewer formal qualifications - often essential for office work. For example, about 37% of working-age adults in Port Talbot have the equivalent of one year of university education, versus a UK average of 49%. A slow death vs hope for the future Ultimately, the future of these towns may rest on the wider fate of the UK's steel industry. And there is some cause for optimism. The government insists that Scunthorpe and the rest of the UK steel industry has a future, not least because of the big increase in spending on a steel-intensive defence Carruthers-Green thinks that the UK's decarbonisation drive could also eventually play to steel's advantage. With more investment in green energy, he says, there will be further demand for the sort of high-quality steel used in things like wind turbines. This, in turn, creates more energy, lowering prices for steel producers. "The hope is we can get into this virtuous spiral," he adds. Gareth Stace, director general of the trade group UK Steel, is a little more cautious, however. There's a "worst case" scenario where the UK "continue[s] to make less and less and less, he he puts it, "We don't go out of business in one bang". Instead, there's a slow he also believes that with some tailored policies, steel could be revived even in this scenario. In particular, he wants to see action on energy prices, as well as policies on procurement in which government departments buy more steel from the UK instead of from abroad."If it works," he says, "for the first time in a very, very long time, we'll actually have some hope for the future."Additional reporting: David Macmillan BBC InDepth is the home on the website and app for the best analysis, with fresh perspectives that challenge assumptions and deep reporting on the biggest issues of the day. And we showcase thought-provoking content from across BBC Sounds and iPlayer too. You can send us your feedback on the InDepth section by clicking on the button below.
