Wales reacts to steel job cuts

(Pic : Wales Online)

As you're all probably more than aware, yesterday Tata Steel Europe announced 1,050 redundancies at steelworks in Wales and England:

• 750 jobs are to go at Port Talbot steelworks (about 19% of the workforce).
• 200 support jobs are to go across multiple sites.
• 100 job losses will be shared between steelworks in Trostre (Llanelli), Corby and Hartlepool.

I'm focusing on a statement from Business & Economy Minister, Edwina Hart (Lab, Gower), earlier today which gave AMs an opportunity to share their opinions – though they've made them clear before (Assembly takes a ride on Heavy Metal; Assembly Calls for Steel Industry Support).

It also looks as though the Enterprise & Business Committee are going to hold an inquiry on the steel industry before the Assembly dissolves for the election.

In opening, the Minister expressed sympathy for those involved (clip). Her immediate priority is to support those affected, and a task force has been established which includes representatives from Tata, trade unions and other bodies. The impact of the decision will go beyond the steelworks' and into the wider supply chain and local businesses – support for them will also be considered.

The Welsh Government has a strong relationship with Tata, even though the company believe the redundancies were necessary to improve competitiveness in difficult market conditions. Tata have called for the UK Government and EU Commission to take urgent action on energy prices and steel imports; the Welsh Government support EU investigations into anti-dumping measures against China.

In terms of support, the Welsh Government are considering research & development, skills, environmental protection and business rates – but the Minister admitted it might be difficult to apply a blanket reduction in business rates, and will instead look at valuations and rental values. The Welsh Government were also fully supportive of the British steel charter in procurement, particularly for major transport projects.

An enterprise zone could be established for Port Talbot, and the Minister has written to the UK Chancellor asking for bigger capital allowances as a result.

Shadow Economy Minister, William Graham (Con, South Wales East), expressed support for the task force, though he asked for clarification on how long it would take until business premises are revalued (clip). He called for procurement policy to be changed to ensure Welsh steel was "used at every opportunity". Although he also supports the proposed enterprise zone, he didn't believe it would be a panacea. However, William said we should take an optimistic view of steel-making.

Edwina Hart offered a rare apology to the opposition for not publishing the statement in advance, before moving on, saying she believes there was grounds for optimism because Tata didn't close any plants when they could easily have done so, and it was important to recognise what's happening globally. A Treasury report is due imminently on changes to business rate valuations, but state aid rules would need to taken into consideration as well as the impact any cut in business rates would have on government coffers.

David Rees AM (Lab, Aberavon) underlined it was still unclear who precisely will lose their jobs, but it was important communities understand the Welsh Government are taking it seriously (clip). The produce and skills are up to standard and it's clear Tata believe there's a future. He asked whether schemes like ReAct would be resurrected and what sort of support would be provided for local businesses?

The Minister admitted the level of uncertainty was "getting to workers", questioning whether a skilled workforce leaving the sector might hinder the company in the long-term. She was keeping an open mind on training and careers advice, and said Tata wouldn't have made their investments down the years if they didn't have confidence.

Rhun ap Iorwerth AM (Plaid, Ynys Môn) said the dire situation "was no secret" (clip). He called for a thorough, long-term examination of the future of the Welsh steel industry , though he was certain it has a bright future despite current problems. He was disappointed the Welsh Government dismissed Plaid's suggestion of taking a stake in Tata – which he described as "not nationalisation" - so easily, asking what assessment the Welsh Government made to determine whether it's practical or not? He also asked how enhanced capital allowances would be used?

The Minister told him it wasn't just a Welsh problem but a UK one. A message of hope has to be there and there are a number of ventures Welsh Government can undertake with Tata – like a power plant and the port - but it would be hard to take a stake in a £1billion company. She added that people on the task force were better placed to discuss capital allowances.

Peter Black AM (Lib Dem, South Wales West) raised Newport Unlimited – an urban regeneration company which has brought in around £230million – as a model that could be used to regenerate Port Talbot and enable them to make full use of capital allowances as an enterprise zone (clip). The task force is right to focus minds and attract investment from the UK Government, but Peter criticised Welsh Government inaction on business rates. He also asked about the EU's Globalisation Investment Fund and how it could be used to support retraining.

Edwina said the Deputy Minister for Skills, Julie James (Lab, Swansea West), was looking at training and EU funds. As someone involved with Newport Unlimited, it'll be put before the task force in later meetings and it'll be their decision whether to take it forward.

Altaf Hussain AM (Con, South Wales West) emphasised the need to ensure Tata remains a major employer, and acceptance that Chinese steel is of inferior quality with no consideration given to either the environment or worker safety (clip). He insisted minimum standards be brought in for public procurement, and called for more innovation – expressing disappointment that the Welsh Government refused a grant to Tata to work with local schools on engineering. Altaf also raised the question of whether Tata in Port Talbot can access local coal seams?

The Minister said Tata had considered their own coal mine, but costs were a massive issue and alternative developments are under discussion. She repeated that procurement rules had been changed, but further work was needed, adding that Tata themselves would tell anyone how supportive the Welsh Government have been.

Following Newport's example, could there be a "Port Talbot Unlimited"?
(Pic : britainfromabove.org.uk)

John Griffiths AM (Lab, Newport East) said the position at Llanwern was unclear (it was said more than 100 jobs could be lost) and sought greater clarity (clip). He also asked whether the Llanwern works, as a substantial site, could also become an enterprise zone?

The Minister has daily discussions with Tata and will raise issues. She said that despite Port Talbot and Llanwern operating as a single unit, Llanwern was effectively a car plant due to its production of galvanised steel for the car industries (Zodiac line), but as people can access other jobs relatively easily it would be difficult to make it an enterprise zone.

Bethan Jenkins AM (Plaid, South Wales West) told the Assembly that action was more important than thoughts, calling for a campaign against any job losses – particularly compulsory redundancies (clip). She criticised media coverage of Port Talbot as a "dying town", but was pleased the Minister said no option would be taken off the table with regard support. Bethan, as an example of investment, called for the Welsh Government to invest in an "architecturally impressive" power plant worth £120-150million, which could halve the deficit at the site, save Tata ~£60million keeping an old power plant open, contribute to emission reductions and create jobs.

The Minister explained – as a former trade union official who's been involved in mass redundancies – there's a need to keep expectations realistic and avoid building up false hope. She agreed to look into the power plant, and to let the Tata board know they're serious.

Keith Davies AM (Lab, Llanelli) focused on engineering, and the opportunities for students to carry out post-graduate research, asking that Llanelli be included within an enterprise zone (clip). The Minister said Trostre has been hit by the closure of a major customer, and emphasised that the Welsh Government already support R&D projects with Tata.

Suzy Davies AM (Con, South Wales West) shared the optimism, but even if there were a full recovery, the news exposes a community that's over-reliant on one wealth provider (clip). She asked whether the task force would work on a longer-term vision for Port Talbot area, and whether the proposed Port Talbot enterprise zone would be different to the sector-based zones elsewhere?

Edwina used Newport Unlimited's work with different industries as a successful example, and the task force would look at the local skill set to see what type of businesses would best fit.

Gwenda Thomas AM (Lab, Neath) expressed concerns about the rock bottom prices of scrap metal and the impact that's having on environmental protection. The Minister thanked Gwenda for raising a new point of discussion, highlighting scrap metal as another business impacted by the steel crisis (clip).

Simon Thomas AM (Plaid, Mid & West Wales) said in light of criticism of Plaid's proposals that the only leader proposing nationalisation of the steel industry was Jeremy Corbyn (clip); Plaid are calling for "joint-ventures" on things like energy and coal reserves. He also asked whether the First Minister would return to India and follow up on pledges from Tata to invest £800million?

Edwina repeated that there's an excellent relationship with Tata at board level, adding that it was important to recognise the wider impact on the region further west and east of Port Talbot. Also, she was happy to work in individual ventures, but would not support "taking a stake" in a global conglomerate.

Alun Davies AM (Lab, Blaenau Gwent) sees the impact of a steelworks closure everyday, extolling the action in Cardiff Bay versus the inaction in London. He wanted assurances that representations would continue to be make to the UK and EU through this tough period. Edwina said all everyone's asking for "is an even playing field" and to ensure hands aren't tied behind backs (clip).

Mark Isherwood AM (Con, North Wales) asked for assurances that no jobs would be lost at Shotton (half-jokingly because there were none). He also said the Minister's statement fell short of adopting the British Steel Charter and asked what direct communication with the EU was happening following a steel summit last November? The Minister said officials were actively engaged with the summit and afterwards, while the charter was included as practice in procurement policy (clip).

It Happens....

This is certainly bad news, but it could've been a lot worse....
(Pic : BBC Wales)

This will come as no comfort to those who'll soon be on the receiving end of bad news, but it could've been worse.

Being a cheery, optimistic sort I expected at least one of the Tata plants in Wales to close completely, but with the exception of Port Talbot they've come away relatively unscathed....this time.

In a back-handed way it shows Tata believe there's a future for Welsh steel-making, but what that future will look like is up in the air.

The problem is that while the plants still make money, they don't make enough to break even or make a profit; an issue compounded by the steel price crash, Chinese steel dumping, high energy costs etc. Whenever there's an urgent need to cut costs the easiest way to do that is a mass lay-off and/or production cuts. However, you can't tell whether Tata are simply trying to ride out the current crisis or delaying the inevitable.

If the plants' maintain their current output with a smaller workforce it shouldn't, on paper, affect the supply-chain as hard as it otherwise would have – though local communities will feel the loss of income; Tata are one of the better paying private employers in the area.

It's tempting to demand the Welsh Government "do something" by nationalising or part-nationalising the Welsh steel industry – in the same way they stepped in with Cardiff Airport - but that wouldn't solve underlying issues with the global steel market or make Welsh steel anymore attractive. It would suggest Tata are doing something wrong as a business when they're simply victims of circumstance. If politicians turned up on their doorstep with a big sack of money on our behalf - when Tata is, at heart, a sound business – we'll be taken to the cleaners and every anchor company will expect it in the future.

Supporting workers is a no-brainer, but a knee-jerk government intervention into the steel industry could make things worse. We would be pushing steelworkers to make something they can't sell and that could cause steel prices to fall even further. It would also cost hundreds of millions of pounds and might fall foul of state aid rules which have, it's worth pointing out, been changed by the EU recently to take into account economic under-performance and energy intensive industries (so it shouldn't be taken off the table, just left as a option of last resort).

All of the steelworks are significant pieces of national infrastructure, so limited state intervention isn't as outdated an idea as it sounds. Other countries are doing it and you could foresee a government-backed deal on energy and business rates; just don't get your hopes up of "Steel Cymru" or red flags flying above the works any time soon. There were ideas from Prof. Gerald Holtham and Adam Price on this yesterday (here).

It's worth repeating : apart from the individuals involved, the steel industry as a whole got off lightly this time.

This isn't a "Redcar moment" or a "death sentence" but it's another shot across the bow. The Welsh Government seem more than aware of what's happening – whilst having the turning arc of an oil tanker when it comes to actually doing something – but it's the UK Government and EU Commission in particular who are consistently ignoring the warnings.